i* 



O- 






^ 












V * * * ° * "% \> * Y * ° /- ^ 



W : 





V' 



















6^ 



) v * 












■a <- " < r. ■■ s a & 




^rf 



% .^r*vV ^.k*.vV </ v Vri>>* 











^ o* : 






%, ^ .-* .v^a.% ^ ,«, A„rx< 



%^ : 








"\^ 







< V V ir n ^7i \ >> 



^ * 



V * .. 9fc 





3 ^. 




BUDGET MAKING 



A HANDBOOK ON THE FORMS AND 
PROCEDURE OF BUDGET MAKING 
WITH SPECIAL REFERENCE TO STATES 



BY 



ARTHUR EUGENE BUCK 

NATIONAL INSTITUTE OF PUBLIC ADMINISTRATION 

STAFF MEMBER OF THE NEW YORK BUREAU 

OF MUNICIPAL RESEARCH 




D. APPLETON AND COMPANY 

NEW YORK LONDON 

1921 






COPYRIGHT, 1921, BY 

D. APPLETON AND COMPANY 



PRINTED IN THE UNITED STATES OF AMERICA 



DEC 24 1921 
©CU653224 






NATIONAL INSTITUTE OF PUBLIC 
ADMINISTRATION 

261 Broadway, New York City 



The National Institute of Public Administration is an 
educational and scientific institution. It offers courses for 
those who are looking forward to careers in such fields of 
public service as city management, civic research, and de- 
partmental administration. In the furtherance of this edu- 
cational work particular attention is given to scientific 
research in pubic administration, especially in state and 
local governments. Through this research the Institute pro- 
poses to bring together and make available in printed man- 
uals, such as this one, the best practices of administration. 
As a part of this research, technical and consultant service 
is rendered to public officials, civic organizations, and other 
agencies interested in better government. To this end the 
New York Bureau of Municipal Research is combined with 
the National Institute of Public Administration. 



Trustees 



Newton D. Baker 
Robert S. Brookings 
Richard S. Childs 
Robert Fulton Cutting 
Raymond B. Fosdick 
Edwin F. Gay 
Mrs. E. H. Harriman 



Herbert Hoover 
A. R. Hatton 
Vernon Kellogg 
Frank 0. Lowden 
Charles E. Merriam 
E. R. A. Seligman 
Delos F. Wilcox 



PREFACE 

It is not the purpose of this handbook to discuss the philosophy 
and theory of the budget, but to present model budget forms and 
to outline the procedure of budget making in such a way as to 
be of assistance to those engaged in the actual work of preparing 
budgets. Although the book is written with special reference 
to state budget making, it is also applicable to city budget 
making. Illustrations of the various forms and methods of 
budget making are drawn from the practices of both state and 
city governments. It is hoped that the treatment of the subject 
is such as to make this book of value not only to administrative 
officers and members of legislative bodies, but also to the general 
public and students of government. 

The outline in Chapter II of all state budget-making authori- 
ties and their staff agencies makes this chapter somewhat of a 
catalogue of facts. Although this was not the intention of the 
writer, it seemed that the detailed information could not be 
omitted and at the same time a comprehensive discussion be 
given of a very important question in budget making, namely, 
who should prepare the budget and what assistance is needed. 
The discussion of the technique of practical budget making 
begins with Chapter III and extends through Chapter X. Chap- 
ters XI and XII are added because of the great importance of 
proper administrative organization and methods in the carrying 
out of the budget plan after it has been formulated and adopted. 

Valuable suggestions have been received from several persons 
engaged in actual budget-making work who have read parts or 
all of the manuscript. The writer is also indebted to his asso- 
ciates of the Bureau of Municipal Research for much helpful 
advice. 

A. E. Buck 



CONTENTS 



CHAPTER PAGE 

Preface . vii 

I. The Budget and Its Relation to Government Work . 1 

II. Budget-Making Authorities and Their Staff Agencies . 6 

III. Character of the Information Required in Budget 

„ Making 29 

IV. Classification of the Budget Information .... 38 

V. The Estimate Forms 68 

VI. Preparing the Estimates and Gathering Other Budget 

Information 97 

VII. Reviewing and Revising the Estimates .... 107 

VIII. The Form and Contents of the Budget . . . . 117 / 

IX. Appropriation, Revenue, and Borrowing Measures . . 136 

X. Legislative Consideration and Action on the Budget . 157 

XI. Business Standards and Methods Needed in Carrying 

Out the Budget 170 

XII. Administrative Organization and the Budget . . . 191 

Appendices 

I. Citations of State Budget Laws 205 



II. Sections of the Model State Constitution . 

III. The Budget in the Model State Constitution 

IV. Standard Budget Section for City Charters 
Index 



207 
213 
219 
223 



BUDGET MAKING 



CHAPTEE I 

THE BUDGET AND ITS RELATION TO GOVERNMENT 

WORK 

One of the most important features of any government 
is the control that is exercised over the raising and spend- 
ing of public money. Each year a government must make 
certain expenditures, the amount of which depends upon 
the scope of its activities, the volume of work undertaken 
and the manner of carrying on this work. Each year 
these expenditures must be met. This requires the rais- 
ing by taxation or otherwise of an equivalent amount of 
money. . As a result, adjustments must be made year 
after year between the needs of the government and its 
income. Out of this situation arises the need for scien- 
tific financial planning, in other words, the need for a 
budget system. 

The term " budget system' ' has recently become one 
of our most common phrases. Already 46 states have 
provided by statute or by constitutional amendment for 
the establishment of such a system. Scores of cities 
throughout the country are using budget methods in con- 
ducting their finances. Eecently Congress provided for 
the establishment of a budget system for the national 
Government. Such a system involves the formulation 

l 



2 BUDGET MAKING 

of the fiscal policy of the government and the execution 
of that policy. Its essential elements are: (1) a docu- 
ment, or series of documents, setting forth a comprehen- 
sive financial plan for the government; and (2) a proce- 
dure for formulating, reviewing, and adopting this plan, 
and for carrying it into effect. 

The Budget— What It Is 

The budget, in the strict sense of that term, is a com- 
plete financial plan for a definite period, which is based 
upon careful estimates both of the expenditure needs 
and of the probable income of the government. That is, 
the plan must present two sides, an expenditure side and 
an, income, or revenue, side. 

The finances of a family furnish a simple illustration 
of what the budget is. Certain necessary expenditures 
for such things as \f ood, clothing, and housing must be 
met. Other expenditures for such things as^carfare, med- 
ical attention, insurance, taxes, amusements,^ and recrea- 
tion are more or less necessary. These, taken together, 
make up the total expenditures of the family. Then there 
is the income from such sources as salaries, earnings from 
business, interest from deposits or loans, dividends, etc., 
which, taken together, constitute the total income of the 
family. Thus we have, on the one side, the spending re- 
quirements of the family, and, on the other side, the in- 
come to meet these requirements. The expenditures for 
the different classes of things should bear a certain pro- 
portion to each other and the total expenditures should 
bear a definite relation to the total income of the family, 
unless we are to accept Bret Harte's advice to young 
men: " Always live within your income even if you have 
to borrow money to do it!" To determine the proper 



BUDGET AND GOVERNMENT WORK 3 

proportion of the different expenditures and their rela- 
tion as a whole to the total income!, some planning in ad- 
vance is necessary. When this planning is properly done, 
we have what may be called a' family budget. 

Turning from private to public finances, a state gov- 
ernment, for example, must make expenditures to carry 
on its different activities such as health, education, chari- 
ties, and public works. It must meet its debt obligations, 
if it has any, and it must usually provide for the purchase 
of some property and for the construction of certain per- 
manent improvements. To meet these expenditures, the 
state government collects revenues of various kinds, such 
as taxes, licenses, fees, and fines, and, in addition, it may 
borrow money. In order to determine the expenditures 
that should be made for the different activities, the state 
authorities need to take into consideration the relation 
of the needs of each activity to that of every other activ- 
ity and to the needs of the state as a whole, and to pass 
upon the total expenditures of the state only in compari- 
son with the total income of the state. When this is prop- 
erly done and set up in document form, it becomes a 
budget. 

Budget Making and What It Involves 

Effective budget-making procedure constitutes a com- 
plete cycle of operations. The recording of information 
may be taken as the beginning of the cycle. Next comes 
the preparation of the estimates, then the examination 
and careful weighing of these estimates in the light of ex- 
perience and recorded data, and then the formulation, re- 
view, and adoption of the financial plan for the future 
period. Following this is the execution of the plan and 
the recording of more information to be used in the prep- 



4 BUDGET MAKING 

aration of the next budget. And so the cycle is completed. 
This is the interesting and desirable feature about bud- 
get-making; it is continuous. When applied to our sys- 
tem of government, the budget, therefore, insures a cer- 
tain continuity of policy despite frequent administrative 
changes. 

While each budget should be complete in itself, it is, at 
the same time, only a link in the ever lengthening chain 
of the government's financial experience. The fiscal pol- 
icies that enter into the budget are not the outgrowth of 
a single year's planning or a single year's work, but are 
usually evolved over a period of years. And the effect 
of some of them extends perhaps far into the future. In 
projecting an institutional building program, a road- 
building program, or river and harbor improvements, 
plans for such developments may and should look ahead 
five or ten years. To finance such projects a bonding 
policy may be adopted that will place obligations upon 
the government for years to come. For these reasons, 
financial planning for the going concern of government in- 
volves far more than merely formulating a year-to-year 
or biennium-to-biennium program. It involves a calcu- 
lation of the obligations and tax burdens that have been 
placed upon future years by bond issues. A government 
may reduce its tax burdens for a time by borrowings and 
by deferred payments, but eventually these obligations 
will have to be met and then the tax burden will become 
doubly onerous. Such conditions need to be set forth 
clearly on the basis of existing laws and commitments, so 
that current policies may be shaped accordingly. This 
is as much a part of the work of budget making as is 
planning for the immediate future. 



BUDGET AND GOVERNMENT WORK 5 

Public Opinion and the Budget 

If popular government is to continue successfully, it 
must do so on the basis of informed public opinion. The 
public must take an intelligent interest in the affairs of 
government. There is no better means by which the peo- 
ple can know about the work of their government than 
through a properly prepared budget. The budget must 
give attention not only to the classification, distribution, 
and control of expenditures, but also to questions of rev- 
enue, taxation, and public debt. The taxpaying public, 
which now includes practically every individual, is par- 
ticularly interested in the means by which expenditures 
are to be financed. Since the government can spend only 
what it takes from the people, and this amount is limited 
by their capacity and willingness to pay taxes, it is very 
important that they should be given full information 
about the work of the government. It is not enough that 
the budget set forth certain facts and figures concerning 
past, present, and proposed expenditures, and past, pres- 
ent, and anticipated income of the government, but it 
should do so in such a way as to enlist the interest and 
support of the people in the financing of the government's 
work. The budget must be accurate and complete, and, 
at the same time, it must be simple in form and as free 
from technicalities as possible. To describe fully how 
such a budget can be prepared is now the main task be- 
fore us. 



CHAPTER II 

BUDGET-MAKING AUTHORITIES AND THEIR STAFF 

AGENCIES 

I. Budget-Making Authokities 

One of the first questions to be settled by a government 
in adopting a budget system is the determination of the 
agency to be responsible for preparing the budget. As 
a matter of convenience this agency may be designated 
the budget-making authority. In constituting the budget- 
making authority, it is necessary to take into considera- 
tion the organization and the existing methods and pro- 
cedure of the government. This accounts largely for 
the diverse character of the agencies that have been con- 
stituted by states and cities to prepare the budget. 

In most of the states the budget-making authority is 
either the governor or a board. Some states, like Illinois, 
have sought by administrative reorganization to center 
full responsibility in the executive; others, like Wiscon- 
sin, have sought to build up expert staffs to handle most 
of the activities and have placed these staffs under the 
direction of boards, the members of which have long 
and overlapping terms of office. In states of the former 
type the governor has become the budget-making author- 
ity, in states of the latter type a board, or super-board, 
generally composed of representatives of the more impor- 
tant administrative boards, has been constituted for this 
purpose. Most states, however, that have adopted bud- 
get methods have not yet attempted administrative re- 
organization, and in these states either the governor, or a 

6 



BUDGET-MAKING AUTHORITIES 7 

board, or a legislative committee acts as the budget-mak- 
ing authority. 

In a large proportion of the cities the chief executive, 
that is, the mayor or the manager, formulates the budget 
plan. Among commission-governed cities, the budget is 
prepared by the commissioners acting as administrators 
and authorized by them sitting as a council. In a num- 
ber of cities the budget is prepared by a board, usually 
called a board of estimate, composed of members repre- 
senting the more important administrative departments 
and, in most cases, the council. In a few cities an agent 
or committee of the council prepares the budget. 

Classification of Budget-Making Authorities 

As indicated by the above brief statement, the budget- 
making authorities of states and cities may be classified 
under three general types, namely, (1) the executive type, 
when the chief executive officer is responsible for the 
formulation of the budget; (2) the board type, when a 
group of administrative, or administrative and legisla- 
tive, officers is responsible for the preparation of the 
budget; and (3) the legislative type, when the legislative 
body, through one of its committees or agents, formulates 
the budget. Only in the executive type is the budget-mak- 
ing authority of such a character that responsibility can 
be definitely placed for the formulation of the financial 
plan. 

The Executive Type 

The budget plans of 24 of the 46 states that have pro- 
vided either by statute or constitutional amendment for 
budgetary procedure may be classified as belonging to 
the executive type, the governor being responsible for 



8 BUDGET MAKING 

the initial budget plan. These states are as follows: 
Arizona, Colorado, Delaware, Idaho, Indiana, Illinois, 
Iowa, Kansas, Maryland, Massachusetts, Minnesota, Mis- 
sissippi, Missouri, Nebraska, Nevada, New Hampshire, 
New Jersey, New Mexico, Ohio, Oklahoma, South Caro- 
lina, Utah, Virginia and Wyoming. 1 The budget plans 
of three of these states introduce variations from the 
true executive type, which should be noticed. The bud- 
get law of Indiana provides that the state examiner of 
the state board of accounts (composed of the governor, 
auditor, and state examiner appointed by the governor) 
shall compile the estimates, which the governor shall 
transmit to the legislature together with executive rec- 
ommendations. Under the provisions of the New Hamp- 
shire budget law, the state treasurer (appointed by the 
legislature) compiles the estimates and the governor- 
elect makes recommendations thereon to the legislature. 
The South Carolina budget law^provides that the chair- 
men of the house ways and means committee and of the 
senate finance committee shall sit with the governor at the 
public hearings on the estimates, but responsibility for 
submitting budget recommendations to the legislature is 
placed upon the governor. 

In practice the governor of New Jersey requires the 
assistance and criticism of the state comptroller and the 
state treasurer (both appointed by the legislature) in 
reviewing the estimates and in formulating the budget 
recommendations for the legislature. Likewise, the gov- 
ernor of Virginia designated (1920) an advisory board 
composed of two senators and three representatives of 
the legislature to assist him in the preparation of the 
budget. 

i See Appendix I for a complete list of the citations of all state budget 
laws. 



BUDGET-MAKING AUTHORITIES 9 

The recently adopted national budget plan belongs to 
the executive type, the President being responsible to 
Congress for the budget recommendations. 

The best examples of the executive type of budget in 
cities are found in the centralized-mayor and the man- 
ager forms of government. Toledo, Cleveland, and Den- 
ver are perhaps the best examples of the centralized- 
mayor form of city government. In these cities, the or- 
ganization is such as to place the mayor in a position not 
only to plan effectively, but to carry out the plan when 
it has been voted by the council. Dayton, Akron, Hous- 
ton, and Grand Rapids are the largest of the two hundred 
and fifty or more cities now having city-manager gov- 
ernment. This form of city government lends itself par- 
ticularly well to financial planning and to the execution 
of the budget plan. In a number of other large cities, 
such as, Philadelphia, Detroit, Boston, and Cincinnati, 
and scores of smaller cities, the mayor is more or less re- 
sponsible for the preparation of the budget. 

The Board Type 

Twenty-one states have budget plans that constitute 
budget-making authorities of the board type. In 13 of 
these states the board is composed entirely of adminis- 
trative officers, and in the other eight of both administra- 
tive and legislative officers. The states having budget 
boards or commissions composed entirely of administra- 
tive officers are : Alabama, California, Connecticut, Flor- 
ida, Kentucky, Louisiana, Michigan, Montana, Oregon, 
Tennessee, Texas, Washington, and West Virginia. The 
state budget commission of Alabama is composed of the 
governor, the attorney general, and the state auditor. 
It is also provided that three members and the speaker 



10 BUDGET MAKING 

of the house and two members and the president pro tern 
of the senate shall sit with the commission in the prepara- 
tion of the budget. The budget board of California, 
which has been constituted recently (1921) head of the 
newly created department of finance, consists of the state 
board of control (three members appointed by the gov- 
ernor). This board acts as a whole in the final deter- 
mination of the state budget, which is prepared by one 
member of the board acting as chief of the division of 
budgets and accounts in the department of finance. The 
Connecticut state board of finance, which prepares the 
budget, is composed of three members appointed by the 
governor for overlapping terms of six years, the tax 
commissioner (appointed by the governor), the treasurer, 
and the comptroller. The budget commission of Florida 
is composed of the governor, the comptroller, and the 
state treasurer (all elective). The budget appropriation 
commission of Kentucky consists of the governor, the 
state auditor, and the chairman of the state tax com- 
mission. Louisiana has a state board of affairs, which 
prepares the budget, composed of six members appointed 
by the governor and confirmed by the senate for over- 
lapping terms of six years. The state administrative 
board of Michigan, which makes up the budget, is com- 
posed of the governor, the secretary of state, the state 
treasurer, the auditor general, the attorney general, the 
state highway commissioner, and the superintendent of 
public instruction (all elective). The Montana budget 
is prepared by the state board of examiners, consisting of 
the governor, the secretary of state, and the attorney gen- 
eral. The Oregon budget commission is the state board 
of control composed of the governor, the secretary of 
state, and the treasurer. The Tennessee state budget 



BUDGET-MAKING AUTHORITIES 11 

commission is composed of the governor, the auditor (ap- 
pointed by the governor), the comptroller, the treasurer, 
and the secretary of state (last three appointed by the 
legislature). Texas has a state board of control that 
prepares the budget, consisting of three members ap- 
pointed by the governor with the senate's approval for 
overlapping terms of six years. The Washington budget 
is prepared by the state finance committee composed of 
the governor, the treasurer, and the auditor. The bud- 
get amendment of West Virginia provides that the board 
of public works, consisting of the governor, the secretary 
of state, the auditor, the treasurer, the attorney general, 
the superintendent of schools, and the commissioner of 
agriculture (all elected by the people), shall be the bud- 
get-making authority. Of these 13 states, nine provide 
that the governor shall be a member of the budget board 
or commission and he controls by appointment the budget 
boards or commissions of the four remaining states. 

The eight states having budget boards or commissions 
consisting of both administrative and legislative officers 
are : Georgia, Maine, New York, North Carolina, North 
Dakota, South Dakota, Vermont, and Wisconsin. The 
budget and investigating committee of Georgia is com- 
posed of the governor, the attorney general, the superin- 
tendent of education, and the chairmen of the appropria- 
tion committees of the legislature. The Maine budget 
committee consists of the governor, the state auditor, the 
state treasurer (appointed by the legislature), and the 
chairmen of the committees on appropriations and finan- 
cial affairs of the senate and of the house. The New 
York board of estimate and control, which makes tenta- 
tive budget recommendations to the legislative budget 
committee, is composed of the governor, the comptroller, 



12 BUDGET MAKING 

and the chairmen of the senate finance and the assemhly 
ways and means committees. The legislative budget com- 
mittee, which is the final budget-making authority in New 
York, is made up of the members of the senate finance 
and the assembly ways and means committees, usually 
consisting of about 30 members equally divided between 
the two committees. The budget commission of North 
Carolina is composed of the governor, the four chairmen 
of the committees on appropriations and on finance of 
the house and of the senate, and a representative of the 
minority party of the legislature appointed by the gov- 
ernor. In North Dakota the state budget board consists 
of the governor, the auditor, the attorney general, and 
the chairmen of the senate and house appropriation com- 
mittees of the preceding legislature. The South Dakota 
state budget board is composed of the governor-elect, 
the auditor, the chairman of the tax commission (ap- 
pointed by the governor), the chairmen of the senate and 
house appropriation committees of the preceding legis- 
lature, and two members of the preceding legislature 
chosen by the governor from the two houses. The com- 
mittee on budget of Vermont consists of the governor, 
the auditor, the treasurer, the commissioner of agricul- 
ture (appointed by the governor), the director of state 
institutions (appointed by the governor), a member ap- 
pointed biennially by the governor, and the chairmen of 
the senate finance and the house ways and means com- 
mittees and of the senate and the house appropriation 
committees. The state board of public affairs of Wiscon- 
sin, which is the budget-making authority, is composed 
of the governor, the secretary of state, the president pro 
tern of the senate, the speaker of the house, the chair- 
men of the senate and assembly finance committees, and 



BUDGET-MAKING AUTHORITIES 13 

fhree members appointed by the governor with the sen- 
ate's approval and subject to removal by the governor. 
In every case the governor is a member of the budget 
board and is chairman of the body. 

The budget-making authorities in practically all com- 
mission-governed cities belong to the board type and 
consist of the city commissioners, usually five or seven, 
sitting as a board. Executive responsibility is divided 
among the commissioners. Buffalo, Newark, New Or- 
leans, Portland, Memphis, and Dallas are some of the 
largest of the four hundred or more commission-go v- J 
erned cities. 

There is another group of cities in which so-called 
boards of estimate, or estimate and apportionment, have 
been constituted the budget-making authority. These 
boards are usually composed of the heads of the more im- 
portant departments of the city administration and some 
representatives of the city council. A few of the largest 
cities may be taken as examples of this group. New York 
City has a board of estimate and apportionment com- 
posed of the mayor, the comptroller, the president of the 
board of aldermen, and the five borough presidents, the 
first three members casting nine out of a total of 16 votes 
allowed the board. St. Louis has a board of estimate and 
apportionment composed of the mayor, the comptroller, 
and the president of the board of aldermen. Baltimore 
has a board of estimates consisting of the mayor, the city 
solicitor, the comptroller, the president of the second 
branch city council, and the president of the board of pub- 
lic improvements. The Milwaukee board of estimate and 
taxation is composed of the mayor, the president of the 
common council, the comptroller, the city attorney, the 
commissioner of public works, the city treasurer, and the 



14 BUDGET MAKING 

members of the finance committee of the common coun- 
cil. Other cities in this group are : Minneapolis, Koch- 
ester, Hartford, Syracuse, and a number of smaller cities 
mainly in New York State. 

The Legislative Type 

The budget law of Arkansas requires the budget to be 
prepared by the legislature through a specially consti- 
tuted committee. This committee consists of seven mem- 
bers of the house appointed by the speaker and five mem- 
bers of the senate appointed by the president. The state 
auditor is required to gather the estimates and to com- 
pile them for this committee. Recently (1921) the state 
comptroller did this work for the state auditor. 

The two remaining states, namely Pennsylvania and 
Ehode Island, which have no legal provisions for budget- 
ary procedure, may also be regarded as coming under 
this type, since it is the practice in these states for legis- 
lative committees to gather whatever budget information 
is sought and to make recommendations to the legislature 
for appropriations. 

The budget-making authorities in a number of cities 
belong to this type. Some of the most notable examples 
are: Chicago, Los Angeles, San Francisco, Seattle, 
Providence, and Atlanta. In Chicago the council has al- 
most complete control over the formulation of the budget. 
The estimates are gathered and compiled by the comp- 
troller who submits them to the finance committee of the 
council. This committee, by the aid of a staff, investi- 
gates the estimates and makes recommendations to the 
council. In Los Angeles and San Francisco the budget 
is prepared by the finance committee of the city council. 
In Seattle the finance committee, consisting of five out of 



BUDGET-MAKING AUTHORITIES 15 

nine members in the council, is the exclusive and final au- 
thority on all matters pertaining to the budget. Ratifica- 
tion of this committee's recommendations by the coun- 
cil is a mere formality, since the committee constitutes a 
majority of the council, and the appropriations in the 
form in which they are passed are not subject to veto by 
the mayor. In Providence and Atlanta, the budget is 
prepared by the finance committees of the council. 

II. Budget Staff Agencies 

Need for Staff Assistance in Budget Making 

From the cycle of operations that constitutes the finan- 
cial procedure of the government must be drawn the in- 
formation for budget planning. If this information is 
to be complete, it cannot all be gathered at one time, but 
must be gathered continuously throughout the whole pro- 
cedure. A photograph of the going concern of govern- 
ment cannot tell all the facts about its operation. For 
example, the financial condition of a state government 
may be photographed, and this is often done by means 
of the balance sheet, but such a picture contains very 
little information of value in budget making. It is only 
when a series of such pictures are compared that they 
really begin to have value for budget-making purposes. 

All the facts essential in budget making cannot be gath- 
ered in two or three months near the end of the year or 
the biennial period. The operation of the budget should 
be watched continuously during the entire period and 
the significant facts recorded for use in the preparation of 
the next budget. To do this, there should be some agency, 
or staff, whose duty it is to gather these facts. There 
should be a uniform system of accounting and reporting ; 



16 BUDGET MAKING 

the reports of the spending agencies should be rendered 
currently ; and the facts they contain should be compiled 
and analyzed in such manner as to provide a means of 
keeping the budget-making authority continuously in 
touch with the conduct of governmental affairs. When 
the estimates are submitted, the spending agencies should 
be investigated as to their organization, the methods they 
employ, the quality of service rendered by them, and their 
general needs in order to determine the propriety of their 
demands. Budget making is, therefore, not a simple, but 
a complex, operation; not an intermittent, but a continu- 
ous, procedure; not an undertaking for amateurs, but 
for trained specialists. 

Any staff agency, when organized to assist effectively 
in budget making, should be a permanent body, should 
be composed of a trained personnel, and should have 
the authority to secure all the information needed in the 
preparation of the budget. It will be seen that only a 
few of the states and cities have agencies that measure 
up to all these requirements. 

Kinds of Staff Agencies Assisting in Budget Making 

In a majority of the states adopting budgetary proce- 
dure no provisions have been made for staff assistance 
in the preparation of the budget. It seems that most 
states do not recognize the need for anything more than 
the fixing of responsibility for budget making upon some 
one agency of the government. This having been done, 
the agency is left to its own initiative in securing needed 
assistance and in devising forms and methods for gath- 
ering the data needed in preparing the budget. As a re- 
sult, in many of the states the budget-making authority 
is without permanent, or even temporary, staff assistance 



BUDGET-MAKING AUTHORITIES 17 

and must depend for the budget information upon other 
agencies of the government, many of which are inde- 
pendent of the agency making the budget. 

Only a few of the cities have yet provided a special 
staff agency to assist the budget-making authority in 
the preparation of the budget. In all the larger cities, 
there is a real need for such an agency. 

The agencies that have been provided in several states 
and cities to assist the budget-making authorities in the 
preparation of financial plans may be divided into four 
classes: (1) departments and offices of general adminis- 
tration under the chief executive; (2) budget bureaus and 
assistants to the chief executive; (3) staffs of budget 
boards and commissions; and (4) budget assistants to 
legislative committees. 

Departments and Offices of General Administration 

In the reorganized and consolidated administrations 
of Illinois, Nebraska, and Ohio, departments of finance 
have been created that exercise powers of general admin- 
istration over the other departments and agencies of 
government, especially over the other consolidated de- 
partments. These departments of finance each have the 
authority to correlate administrative work and to stand- 
ardize financial practices and procedure. In each case 
they are under the control of the governor and assist 
him in the gathering of data and in the preparation of 
the budget. The supervisor of administration of Massa- 
chusetts also occupies a position in which he exercises 
certain powers of general administration. In the recent 
consolidation (1919) of the administration, he was placed 
under the governor and council. He prepares the budget, 
which is submitted by the governor to the legislature. 



18 BUDGET MAKING 

Eecently (1921) the department of finance and purchase 
was created in Utah, to assist the governor in budget mak- 
ing and to direct certain work of a general administra- 
tive character. 

The department of finance of Illinois was created by 
the civil administrative code of 1917. It is not, strictly 
speaking, a spending agency, that is, it is not concerned 
directly with the spending of money in performing the 
functions of the state government. By virtue of this 
position it is given administrative supervision and finan- 
cial control over the other departments that expend 
money. At the time the department of finance was cre- 
ated this supervision and control constituted practically 
a new field of work in state government. The depart- 
ment took over no work performed by previously existing 
agencies, except the functions of the governor's auditor 
and the compilation of the budget estimates by the legis- 
lative reference bureau. It is headed by the director of 
finance, who is appointed by the governor with the sen- 
ate's approval for the same term as the governor, that is, 
four years. He receives an annual salary of $7,000. The 
subordinate officers, as specified by the code, are the 
assistant director of finance, the administrative auditor, 
the superintendent of budget, and the superintendent of 
department reports, all of whom are appointed by the 
governor. The superintendent of budget is concerned 
mainly with the compiling and analyzing of the estimates 
and other data relative to the budget. Ten or twelve 
persons constitute the office force of the department. 

Briefly, the functions of the department are to prescribe 
and require the installation of uniform methods of ac- 
counting and reporting; to examine the accuracy and 
legality of accounts and expenditures of other code de- 



BUDGET-MAKING AUTHORITIES 19 

partments; to maintain controlling accounts with the 
other departments; to examine and approve, or disap- 
prove, all vouchers, bills, and claims of the other depart- 
ments ; to formulate plans for better coordination of the 
work of the departments ; to prescribe uniform rules gov- 
erning purchasing methods and procedure; and to pre- 
pare the budget for the governor. Under the finance code 
of 1919, the powers of this department are extended to a 
considerable measure over all departments and agencies 
of the government. 

Information necessary in the formulation of the budget 
is automatically and continuously brought together in the 
department of finance by the exercise of its powers of 
general administration. The director of finance, through 
his power of supervision over the expenditures of the 
state government, is in effect preparing the budget from 
the beginning of one fiscal period for the next fiscal pe- 
riod. In approving items of expenditure, he must con- 
stantly make investigations as to the need for such ex- 
penditures. In this way he becomes thoroughly familiar 
with the current requirements of each department. When 
the budget estimates are submitted to him, he has in his 
department an organized mass of information covering 
every phase of the expenditures made by the several de- 
partments. This information can be used immediately 
for comparative purposes in determining the propriety 
of the estimates. Such additional information as is 
needed can be gathered by staff investigations. If the 
information desired is of a special or technical character, 
he may secure specialists from the other departments to 
make the investigations. The director of finance may call 
any of the department heads, or any of their subordinate 
officers, before him when reviewing the estimates. In 



20 BUDGET MAKING 

revising the estimates, he has unlimited power over those 
of the code departments. If protest is made against the 
action of the director in revising the estimates, the mat- 
ter is referred to the governor for final settlement. When 
the budget has been prepared, it becomes the governor's 
plan and he assumes full responsibility for initiating it in 
the legislature. 

The department of finance of Nebraska was estab- 
lished by the civil administrative code of 1919. It is un- 
der the control of the secretary of finance, who is ap- 
pointed by the governor with the approval of the senate 
for a term of two years. This department exercises pow- 
ers that are similar in scope to those of the Illinois de- 
partment of finance. It prescribes and requires the in- 
stallation of uniform accounting methods and procedure ; 
controls the expenditures of the other departments and 
supervises their financial reports; investigates duplica- 
tion of work among the departments; prescribes rules 
governing the purchase of supplies; and acts as a staff 
agency to the governor in the preparation of the budget. 
The estimates are sent to the secretary of finance, who 
has power to review them. He may revise all estimates 
in his discretion, except those of the elective officers, the 
judiciary, the normal schools, and the state university. 
From the revised estimates the governor makes up his 
budget for presentation to the legislature. 

The department of finance of Ohio was established by 
the administrative code of 1921. It is modeled after the 
Illinois department of finance. The director of finance, 
who heads the department, is appointed by the governor 
with the approval of the senate and serves at the pleas- 
ure of the governor. His salary is $6,500 per year. 
There is a superintendent of budget in the department 



BUDGET-MAKING AUTHORITIES 21 

appointed by the director at an annual salary of $4,000. 
This department installs uniform accounting methods, 
audits the accounts of the administration, controls the 
purchase of all departmental supplies, supervises state 
taxation, investigates inefficiency in the departments, and 
prepares the budget for the governor. The budget esti- 
mates are collected by the department and the director 
is given authority to make such revisions in them as he 
deems wise before they are compiled and sent to the 
governor. From this information the governor prepares 
his budget for submission to the legislature. 

The office of supervisor of administration in Massachu- 
setts was created in 1916. It assumed the powers and 
duties of the commission on economy and efficiency and 
the state board of publication, which were abolished. 
The supervisor of administration is appointed by the 
governor with the consent of the council for a term of 
three years at an annual salary of $5,000. He may be re- 
moved for cause by the governor with the approval of the 
council. The office acts as a staff agency to the governor 
in making investigations. It exercises general adminis- 
trative powers over state employment, state printing, and 
state purchasing. Standardization, rating, and promo- 
tion in civil service are largely under the control of this 
office. The supervisor of administration is authorized 
to collect the estimates, review them, and prepare the 
budget for the governor, who submits it to the legislature. 

In 1921 the department of finance and purchase was 
created in Utah. Its head is the director of finance and 
purchase, appointed by the governor and serving at his 
pleasure. The director's salary is $5,000 per year. This 
department controls all purchasing and contracting for 
the state departments and agencies; it keeps accounts 



22 BUDGET MAKING 

and checks the expenditures of all state agencies ; it makes 
investigations relative to waste and inefficiency in the 
administration; and it gathers the estimates, makes in- 
vestigations and prepares the budget for the governor. 

A Missouri law was enacted in 1921 that created a 
department of budget having functions with reference 
to purchasing and budget making similar to those of the 
Utah department of finance and purchase. Since this law 
was passed referendum petitions of sufficient number have 
been filed with the secretary of state to prevent it from 
becoming operative until voted on by the people at the 
general election of 1922. 

In Cleveland and Toledo the mayor is assisted in the 
preparation of the budget by the department of finance. 
In each case the director of finance is an appointee of the 
mayor and supervises the principal financial operations 
of the city government. He is, therefore, the chief finan- 
cial adviser of the mayor, and his office contains most 
of the information necessary for budget-making pur- 
poses. Likewise, in Dayton the city manager is assisted 
in making up the budget by the department of finance, 
which has powers similar to those above. 

Budget Bureaus and Assistants to the Executive 

The outstanding example of this class of budget staff 
agencies is the Bureau of the Budget of the national Gov- 
ernment. While this Bureau is nominally placed in the 
Treasury Department, it is in practice directly under the 
control of the President's office. The head of the Bureau, 
called the Director, is appointed by the President with- 
out confirmation by the Senate and holds office at the 
pleasure of the President. The salary of the Director is 
$10,000 per year. There is an assistant director appointed 



BUDGET-MAKING AUTHORITIES 23 

by the President at a salary of $7,500 per year and four 
other assistants appointed by the Director at salaries not 
to exceed $6,000 per year. The remainder of the office 
staff is recruited subject to civil service regulations and 
no one is to receive more than $5,000 a year. Each de- 
partment and agency of the Government is required to 
designate one of its officials as budget officer who is re- 
sponsible for the preparation of the estimates of that 
particular department or agency. The Bureau of the 
Budget investigates the work of the departments and 
agencies of the Government, collects and tabulates the 
estimates, and, when the President has made his recom- 
mendations, prepares the budget for submission to Con- 
gress. 

The governor of Idaho has a budget bureau in his office, 
and the governors of Colorado and New Jersey have per- 
manent budget assistants. In the other states, where 
the governor is responsible for the formulation of the 
budget, temporary help is secured to assist him, and in 
most cases no permanent records are kept especially for 
budget-making purposes. 

Eecently (1921) the bureau of budget and taxation was 
established in the office of the governor of Idaho. Form- 
erly this bureau was part of the organization of the de- 
partment of finance, as established under the administra- 
tion consolidation act of 1919. The accounting supervi- 
sion and control over the expenditures of the state are 
now exercised mainly by the auditor's office. Besides as- 
sisting the governor in the preparation of the budget, 
the bureau of budget and taxation investigates inefficiency 
and duplication of work in the departments and has gen- 
eral supervision over state tax matters in conjunction 
with the state board of equalization. The head of the bu- 



24 BUDGET MAKING 

reau is appointed by the governor and receives $3,600 
per year. 

The Colorado budget law established the office of the 
budget and efficiency commissioner. The commissioner 
is appointed by the governor for a term of office cotermin- 
ous with that of the governor and he receives a salary of 
$3,600 per year. He must be qualified as an accountant 
and must devote his entire time to the duties of his office. 
He is provided with such technical and clerical assistance 
as, in the opinion of the governor, is necessary to carry 
on his work. He is given access to the accounts and rec- 
ords of all agencies receiving money from the state, and 
may require these agencies to furnish such financial state- 
ments as the governor may designate. It is his duty to 
assist the governor in the preparation of the budget and 
appropriation bills. Either house of the legislature may 
require the commissioner to appear before it and make 
explanations concerning the budget. 

The New Jersey budget law provides that the governor 
may name not more than two assistants to help him in 
the preparation of the budget. Under this provision, the 
governor named one permanent and one temporary as- 
sistant. The temporary assistant is an accountant and 
works only during the three or four months of each year 
when the budget is being prepared. The permanent as- 
sistant has an office in the state house and necessary cler- 
ical assistance. He prepares the estimate forms and col- 
lects the budget data both by correspondence and by visits 
to the departments and institutions. Each month he re- 
ceives a copy of all payrolls as filed with the comptroller 
and the civil service commission. These are the only 
records that are filed currently in his office. 

The budget laws of Arizona, Oklahoma, South Caro- 



BUDGET-MAKING AUTHORITIES 25 

lina, Virginia, and Wyoming provide that the governor 
shall employ competent assistants to help him in gather- 
ing budget data, in making a general survey of the state's 
financial condition, and in preparing the budget. Vir- 
ginia was the first one of these states (1920) to carry its 
budget law into operation. Here the direction of the 
work was placed under the secretary to the governor, 
who was assisted by a statistician and other members of 
the executive office force. The governor appointed sev- 
eral special survey boards, composed of members be- 
longing to certain state departments and institutions, and 
also secured the assistance of two research agencies from 
without the state to make certain preliminary studies. 

The budget laws of almost one-half of the states, nota- 
bly the budget amendment of Maryland and those laws 
that have been copied from it, make no provisions for 
assistance to the governor in the preparation of the bud- 
get. He must rely upon his office force and whatever 
temporary help he can secure. No permanent records 
of budget data are kept in the executive office; all in- 
formation for the preparation of the budget is gathered 
by means of estimates, hearings, and investigations dur- 
ing one or two months of each year, or each biennium, as 
the case may be, and the subject of budget making is dis- 
missed until the next period of preparation arrives. 

The mayor of Boston is assisted in the preparation of 
the budget by the budget department, headed by the 
budget commissioner, whom he appoints at a salary of 
$5,000 per year. The budget commissioner prepares the 
estimate forms and collects all the information used in 
making up the budget. In Detroit the city comptroller, an 
appointee of the mayor, collects and tabulates the esti- 
mates and submits them to the mayor for his review and 



26 BUDGET MAKING 

revision. After the mayor has made his revisions, the 
estimates are returned to the comptroller, who puts them 
in final budget form for transmission by the mayor to the 
council. 

Staffs of Budget Boards and Commissions 

Several of the states having budget boards or commis- 
sions have provided for staff assistance to these boards 
or commissions in the gathering of budget data and in 
the preparation of the budget. The most notable example 
is Wisconsin. The Wisconsin state board of public af- 
fairs has a secretary who is usually an accountant 
and receives an annual salary of $4,500. A special ex- 
aminer and four permanent accountants are employed by 
the board in addition to the clerical force of the office. 
The board has certain powers of general administration 
vested in it, namely, the power to supervise expenditures, 
the power to devise and require the installation of uni- 
form accounting methods and procedure, and the power 
to formulate plans for coordinating the work of the ad- 
ministration. As a result of the exercise of these powers, 
budget data are being continuously brought together by 
the staff, and the board is placed in a position of author- 
ity when making budget recommendation to the legisla- 
ture. The budget boards of California, Louisiana, and 
Texas also exercise certain powers of general adminis- 
tration that ought to be of great advantage in budget 
making. 

The New York City board of estimate and apportion- 
ment has a budget staff working continuously under the 
direction of its secretary. This staff consists of exam- 
iners, statisticians, accountants, and engineers. The de- 
partmental estimates are transmitted to the secretary of 



BUDGET-MAKING AUTHORITIES 27 

the board and lie assigns examiners to investigate and 
report on the items of the various requests. The esti- 
mates are then assembled and, with the reports of the 
examiners, are turned over to the board for its action. 
The board may ask for additional information and may 
assign members of the staff to make special investiga- 
tions. Prior to 1918 the investigation of the budget esti- 
mates was conducted by the bureau of personal service 
and the bureau of contract supervision, but these bureaus 
were abolished and their staffs placed directly under the 
secretary of the board of estimate and apportionment so 
as to place the members of the board in direct contact 
with the investigational sources of budget information. 

Budget Assistants to Legislative Committees 

The chairmen of the finance and of the ways and means 
committees of the New York legislature each appoint a 
clerk, an accountant, and a stenographer to assist in the 
preparation of the budget. Each clerk receives an annual 
salary of $4,000, together with traveling and other neces- 
sary expenses. These clerks work throughout the year. 
They are required to compile information and financial 
data relating to the spending agencies ; to prepare tables 
of appropriations previously made by the legislature ; to 
procure statistics relating to revenues ; to investigate and 
report on requests for appropriations; to aid the com- 
mittee and the legislature in making investigations per- 
taining to expenditures ; and to assist in the preparation 
of the budget. In order to perform these duties they are 
given the right of access to the offices of all spending 
agencies for the purpose of obtaining information as to 
their operation and their financial needs. 

The finance committee of the Chicago city council has 



28 BUDGET MAKING 

a staff that compiles budget data for the use of the com- 
mittee. The departmental estimates and certain informa- 
tion from the city comptroller's office are submitted to 
the finance committee. Then the committee turns this 
information over to its staff, which scrutinizes the esti- 
mates by means of investigations and in the light of data 
gathered during the year. The staff assists the commit- 
tee in drafting its budget report to the council and in 
framing the appropriation ordinances. 



CHAPTER III 

CHARACTER OF THE INFORMATION REQUIRED 
IN BUDGET MAKING 

The main purpose of the budget system is to establish 
control over the expenditures of government by means 
of comprehensive planning based upon financial informa- 
tion that has been correctly determined and system- 
atically presented. The importance of having sound 
financial information in budget making cannot be over 
emphasized. The budget plan will be defective in pro- 
portion as the information upon which it is based is in- 
complete or inaccurate. It is, therefore, very desirable 
(1) to consider the character of the information needed 
in budget making, and (2) to determine how this informa- 
tion should be classified and arranged for use. 1 

General Character of the Information 

The general character of the information required in 
preparing the budget is comprehended in the following 
questions : 

1. What is the work to be done or to be undertaken? 

2. What ^department, institution, or other agency of 

government is to be immediately responsible for 
doing the work? 

3. What is to be the cost of doing the work? 

4. How is the cost of the work to be met? 

These are the questions that should be decided before 
expenditures are authorized. In other words, these are 

i Classification is discussed in the next chapter. 

29 



30 BUDGET MAKING 

the questions upon which the budget should furnish full 
and complete information. The different factors and 
problems involved in each question will now be con- 
sidered. 



I. The Woek to Be Done oe Undeetaken 

Just what work the government should undertake and 
the extent to which it should carry this work when once 
undertaken is largely a matter of policy and lies outside 
the technique of budget making covered by this book. 
There are, however, two questions that deserve attention 
in this connection. 

Using the Experience of Other States and Cities in De- 
ciding upon New Activities 

When it is felt that a certain need should be supplied 
by the government, valuable suggestions as to just how 
to proceed with the work may be gathered oftentimes 
from the policy and experience of other states and cities 
relating to the same subject. This will sometimes save 
the expense of trying out a policy that has already failed 
elsewhere under similar conditions. It will also enable 
a state or city to profit by the experience of other states 
or cities. Hence, it seems very desirable, especially in 
the case of a state, for the budget-making authority and 
the legislature to establish some means of keeping in 
close touch with the development of the plans and policies 
of other states as related to the general problems of gov- 
ernment. A number of state legislatures have already 
established reference departments or bureaus that collect 
such information for their members and committees. 
Where such agencies exist, they might be made to serve 



CHARACTER OF BUDGET INFORMATION 31 

the budget-making authority as well as the legislature. 
Otherwise, the budget-making authority should gather 
such facts through its staff agency. 

Relation of Revenues and Taxation to Governmental 
Needs 

In providing for the activities of the government, bud- 
get-making authorities and legislative bodies should al- 
ways take into consideration the present and prospective 
resources of the government. That is, the establishment 
of new activities and the extension of old activities should 
never be considered apart from the question of prospec- 
tive revenues available for such purposes and the prob- 
lems of taxation connected with the raising of these rev- 
enues. 



II. The Agency of Government Responsible for 
the Work 

The work of the government must be accomplished 
through the departments, institutions, and other agen- 
cies. In other words, responsibility for doing the vari- 
ous kinds of governmental work must be fixed upon some 
organization unit. When new activities are to be under- 
taken and the character of the work has been determined, 
then comes the question of organizing or designating the 
agency or agencies best suited to do the work. This is 
not always an easy task. In most cases it involves a 
study of the existing governmental organization to see if 
there is in it already an agency suited to the perform- 
ance of the work. Usually such a study has been omitted, 
the result being that practically every time a new activ- 
ity has been undertaken a new agency has been set up to 



32 BUDGET MAKING 

do the work. In fact, state legislatures seem to prefer 
this method, since it does not disturb the status quo, and, 
at the same time, it increases the amount of political 
patronage. This has been one of the principal causes of 
the present chaotic condition especially of state adminis- 
trative organization. The recent movement for the re- 
organization of state administration into a few depart- 
ments along functional lines has developed mainly be- 
cause of this condition (see Chapter XII). 

Determining the Fitness and Efficiency of a Governmental 
Agency to do Work 

The planning and establishing of efficient organization 
units to do the work of government is just as important 
as is the conceiving and planning of the work to be done. 
In other words, policy should not be considered as 
divorced from administration. It makes no difference 
how sound or how well thought out a policy may be, it 
will amount to little or nothing unless it is properly exe- 
cuted. This brings up the questions of the fitness and 
of the efficiency of an administrative agency or organ- 
ization unit. In creating an agency or in assigning work 
to an existing agency the fitness of the agency to do the 
work that is planned should first receive consideration. 
Such problems are here involved as whether or not the 
work proposed demands an agency headed by a single 
person or one headed by a board. In matters of organ- 
ization and reorganization the experience of other states 
and cities will be found helpful (see Chapter XII). "When 
it comes to determining the efficiency of an agency with 
reference to the work it is performing, this can be de- 
cided largely upon the achievements of the agency meas- 
ured in terms of cost. Here again, proper records are 



CHARACTER OF BUDGET INFORMATION 33 

an invaluable aid to the budget-making authority and the 
legislature. Such records should go beyond what is 
merely necessary for financial control and should deal 
with the unit cost of doing different phases of the work. 
Cost records, if properly kept, are a means of revealing 
poor administration (see Chapter XI). 

In carrying on the work of government the methods and 
procedure of administration are very important elements 
in the cost of the work— elements that should not be over- 
looked or disregarded in the preparation of the budget. 
If there are no methods for determining the qualifications 
of persons, for fixing salary standards, and for rating effi- 
ciency in public employment, then the cost of doing work 
must necessarily be greatly increased. If supplies, ma- 
terials, and equipment are independently purchased by 
the various using agencies without any centralized con- 
trol and without regard for standard specifications, then 
the cost of goods needed in the performance of work is 
almost certain to be very much greater (see Chapter XI). 

III. The Cost of the Woek 

After the general character of the work has been de- 
cided upon and the agency or agencies to be responsible 
for doing the work have been selected or established, the 
next step is the determination of the cost of the work. 
To begin with, the work to be done must be translated into 
concrete things before the cost can be accurately esti- 
mated. Such things fall into two main groups, the one is 
services and the other is objects. In order to perform 
any work there must be labor, both mental and physical, 
of persons, and there must be supplies, materials, and 
equipment. These facilities for doing work consist of 



34 BUDGET MAKING 

concrete things that may be purchased at definite prices. 
To estimate accurately the cost of services, supplies, ma- 
terials, and equipment, they should each be reduced to 
the unit basis, that is, to individual stenographers, to 
tons of coal, to bags of cement, to single typewriters, and 
so on. The cost of each unit can then be estimated by 
the budget-making authority in the light of past and pres- 
ent prices and the trend of prices for the future. It is 
then only a matter of multiplying the quantities estimated 
to be required by the cost of their various units and total- 
ing the results to determine the total cost of the work. 

Need for Standard Specifications 

It is not an easy task, however, to determine unit costs 
unless there has been some attempt to classify, standard- 
ize, and grade the personal services, and also to provide 
standard specifications for the purchase of supplies, ma- 
terials, and equipment. Otherwise, when estimates of 
the cost of services and goods are made by the various 
organization units, the unit cost will vary according to 
the standards used by each particular agency; conse- 
quently it will be very difficult to make comparisons be- 
tween the estimates of the different organization units 
and also to determine whether or not an estimate is rea- 
sonable (see Chapter XI). 

IV. How the Cost is to be Met 

"When the cost of the work has been estimated, then 
comes the question of how the cost is to be met ; in other 
words, how the proposed expenditures are to be financed. 
Two means of financing are commonly used, one is to 
meet the expenditures out of current revenues, and the 



CHARACTER OF BUDGET INFORMATION 35 

other is to meet them out of borrowed money. If the first 
alternative is chosen, then an examination must be made 
of the condition of the fund or funds of the treasury out 
of which the cost of the work in question may be met. Or, 
perhaps, a new fund is to be set up. Let us assume, how- 
ever, that the cost of the work is to be met out of the 
" general fund," a fund commonly found in the several 
states and cities. First, the condition of that fund should 
be determined as of the beginning of the fiscal period dur- 
ing which the work is to be done. The result will be either 
a balance or a deficit. Then the revenues accruing to the 
fund under the existing laws during the fiscal period 
should be estimated, taking into account the balance or 
deficit at the beginning of the period. This will give the 
total estimated receipts in the fund available to meet the 
cost of the work in question. If the total estimated re- 
ceipts of the fund do not equal the total expenditures to 
be made from it, then obviously either the proposed ex- 
penditures must be reduced or the estimated revenues 
must be increased by additional or new taxation. Should 
the budget-making authority decide not to reduce the 
proposed expenditures in order to make them commen- 
surate with the anticipated revenues, then it should be 
the duty of that authority to recommend new sources of 
revenue that will accrue to the fund in question. It is 
important that such recommendations should be made, 
since the burden of taxation imposed in raising revenues 
to meet proposed expenditures is a very significant factor 
in finally determining the urgency of such expenditures. 

Questions to be Decided in Issuing Bonds 

If the second means of financing is used, namely, of 
meeting the expenditures by issuing bonds, then consid- 



36 BUDGET MAKING 

eration should be given to the bonding policy. Briefly, 
this involves three main questions : the purpose of the 
bonds, the term of the bonds, and the nature of the bonds. 

Since bonds may be issued for all kinds of expenditures, 
it is necessary first to determine the kinds for which 
bonds may be most advantageously issued. This can be 
determined most easily by the character of the expendi- 
tures, whether such expenditures are for current ex- 
penses and fixed charges, or for what is commonly called 
capital outlays, that is, the acquisition of property of a 
permanent nature. Current expenses cover the expendi- 
tures made in running the government from day to day, 
while capital outlays include those expenditures for 
lands, buildings, and other purposes that increase the 
capital assets of the government. It is generally consid- 
ered bad policy to issue bonds for current expenses or to 
fund deficiencies in current income, since this is merely 
deferring and loading upon a future period burdens that 
should be currently borne. If this is done, the future pe- 
riod will then have its own current expenses and in addi- 
tion those of a past period, so there will be a double load 
upon it. Bonds are most commonly issued for capital 
outlays and for emergency purposes. 

Next comes the question of the term of the bonds. It 
is not uncommon to find states and cities issuing bonds 
for a term of 50 years. However, in financing construc- 
tion work it is regarded poor policy to issue bonds for a 
longer term than the probable life of the improvement. 
That is, road surfacing, when the roads last from 10 to 
15* years, should not be financed by 50-year bonds. If 
such be the case, the taxpayers will have at least three 
bond issues loaded upon them for surfacing and resurfac- 
ing the roads before the first issue is paid. 



CHARACTER OF BUDGET INFORMATION 37 

Finally, there is the question of the nature of the bonds. 
Two kinds of bonds, designated as "serial" and as "sink- 
ing fund," are commonly used by the states and munic- 
ipalities. Serial bonds are met currently from the gen- 
eral treasury and are usually paid in equal annual install- 
ments, the first installment falling due within a year or 
two after the date of issue. Sinking-fund bonds are re- 
deemed at the end of their term from a fund into which 
has been set aside periodically certain amounts that 
taken together equal the principal of the bonds at the 
date of maturity. It will be seen that paying serial bonds 
is a much simpler procedure than amortizing sinking- 
fund bonds, and, besides, the sinking 'fund bonds do not 
sell to any better advantage than the other kind ; in fact, 
bankers and bond brokers have recently come to prefer 
the serial to the sinking-fund bonds. 

In recommending the issuance of bonds to meet expen- 
ditures the budget-making authority should not only give 
close attention to the above questions, but it should also 
take into consideration the existing debt obligations and 
the tax burdens such obligations place upon future pe- 
riods. 



v 



CHAPTEE IV 
CLASSIFICATION OF THE BUDGET INFORMATION 
Need for Classification 

To know how to classify budget information properly 
is equally as important as to know the character of the 
information required, since the value of financial and sta- 
tistical information depends very largely upon how it is 
classified and arranged for use. The proper classifica- 
tion of budget information insures uniformity in pres- 
entation; makes for accuracy in planning; facilitates 
gathering, compiling, and reviewing; enables compari- 
sons to be made with past years as well as between de- 
partments and institutions of similar character; and 
makes the budget easier to understand when it is set up. 
If the budget classification is properly tied into the ac- 
counting system, it makes for better control and more ef- 
ficient reporting. 

I. Expenditure Classifications 

Expenditures are classified: (1) by functions, (2) by 
organization units, (3) by objects, (4) by character, and 
(5) by funds. The Virginia budget law and those of sev- 
eral states copied from the Virginia law require the ex- 
penditures for each agency to be classified by functions, 
character, and objects. The budget laws of Kentucky, 
Minnesota, New Jersey, and Vermont prescribe general 
titles for what may be designated as object classifica- 

38 




CLASSIFICATION OF INFOBMATION 39 

tions of expenditures. These titles are in each instance 
very indefinite in scope and meaning, and besides con- 
fuse both the object and the character basis of classifica- 
tion. Most of the state budget laws, however, merely au- 
thorize the budget-making authority to prescribe such 
classifications ( as may seem necessary. This seems pre- 
ferable to outlining the classifications in the laws, since 
it may be advisable to change or modify them from time 
to time. A discussion of the several classifications of ex- 
penditures follows. 

Classification by Functions 

The work of state governments has been divided by 
their constitutions into three branches, namely, legisla- 
tive, judicial, and executive. These were formerly con- 
ceived as the three " powers' ' of government to be per- 
formed by separate and distinct agencies. In practice, 
however, one agency sometimes performs work belonging 
to all three of these branches; legislative and judicial 
powers are often delegated to executive or administra- 
tive agencies. The grouping of governmental agencies 
upon this basis is therefore, from the standpoint of strict 
functional lines, largely an arbitrary one ; still under our 
constitutional system such grouping seems advisable for 
proper financial consideration, in fact, it is made obliga- 
tory for budget purposes in some of the states. For ex- 
ample, the Maryland budget amendment provides that 
the estimates of the legislative and of the judicial 
branches shall be included by the governor in the budget 
without revision. This necessitates a segregation of the 
agencies performing the work of these two branches from 
those of the executive branch. 

For purposes of financial information a few states have 



40 BUDGET MAKING 

provided a general classification of all their activities. 
New York's so-called standard classification of agencies 
of government is perhaps one of the best examples. It rec- 
ognizes the legislative, judicial, and executive branches, 
and divides the executive branch into the following sub- 
divisions: administrative, regulative, educational, agri- 
cultural, defensive, penal, curative, charitable, protective, 
constructive, and general. New Jersey, Ohio, and Vir- 
ginia have adopted similar classifications for purposes 
of budget information. These classifications, however, 
only approximate functional lines in the case of some 
agencies, since an agency may be performing work be- 
longing to two major functions but must be grouped under 
one or the other. Nevertheless, such an arrangement 
enables one to ascertain, in a general way, how much is 
expended for the prevention of crime, for the protection 
of health, for the development of agriculture, for the 
regulation of commerce and industry, for the promotion 
of education, and so on. Such a classification, however, 
of the activities of government along functional lines has 
its chief value in working out plans for the reorganization 
and integration of state administration. 

Practically all of the studies relating to administra- 
tive reorganization of state governments have assumed 
in the beginning that the work of government can be 
grouped along functional lines. Proceeding upon this 
assumption, the duties of existing agencies have been 
analyzed and a small number of groups, having clearly 
defined spheres, have been set up. Then each group has 
been designated a department under an appropriate title. 
Thus, in Illinois, under the reorganization of 1917, nine 
departments were established: namely, finance, agricul- 
ture, labor, mines and minerals, public works and build- 



CLASSIFICATION OF INFORMATION 41 

ings, public welfare, public health, trade and commerce, 
and registration and education. The plans of reorganiza- 
tion adopted by Idaho and Nebraska in 1919 followed 
the general principles of the Illinois plan. The Idaho 
plan created nine departments but saw fit to emphasize 
different functions. For example, a department of recla- 
mation was created, reclamation being an important func- 
tion in Idaho but not in Illinois. The Massachusetts re- 
organization plan of 1919 provided for 20 departments, 
thus integrating the administrative work to a less degree 
than in Illinois, but at the same time including the con- 
stitutional officers (see Chapter XII). In these states 
the structural organization of the administration coin- 
cides very largely with the general classification by func- 
tions. The expenditures for the various functions are 
represented, therefore, by the expenditures of the organi- 
zation units, and it becomes practically unnecessary to 
have a classification of the general administrative func- 
tions of government, such as that used in New York at 
the present time. 

The United States Bureau of the Census has devised a 
so-called functional classification of expenditures that it 
uses in its financial statistics of states and cities. For 
states this classification is as follows: (1) general gov- 
ernment; (2) protection to persons and property; (3) 
development and conservation of natural resources; (4) 
conservation of health and sanitation; (5) highways; (6) 
charities, hospitals, and corrections; (7) education; (8) 
recreation; and (9) general. When this classification is 
applied to cities, the third group is omitted and the fourth 
is broken into two groups, one of which is "conservation 
of health " and the other "sanitation, or promotion of 
cleanliness"; also, a tenth group, called "miscellaneous," 



42 BUDGET MAKING 

is added. Expenditures for judicial and legislative pur- 
poses are not recognized as of sufficient importance to be 
shown apart from general administrative expenditures. 
i l Highways " and "hospitals" are concrete objects and 
not functions of government, as it would appear from 
this classification. Then the classes ' ' general ' ' and ' ' mis- 
cellaneous ' ' are not functional groups ; they do not prop- 
erly belong to any kind of classification. To use such 
class titles is to admit on the face of it the unsound basis 
of one's classification. This classification, therefore, is 
little more than a convenient arrangement for the group- 
ing of state and city expenditures under a few headings. 
It cannot be used advantageously as a budget classifica- 
tion. No state, except Idaho, and only a few cities have 
attempted to use it in connection with budget making, and 
then only with considerable modification. 

Functional classification, when applied to the work of 
a department or administrative agency, is useful as a 
means of determining the internal organization. It was 
upon this basis that the Illinois departments, organized 
under the civil administrative code, were subdivided into 
bureaus or divisions. For example, the Illinois depart- 
ment of public health has eleven divisions: executive, 
communicable diseases, diagnostic laboratories, tubercu- 
losis, sanitation, hotel and lodging-house inspection, vital 
statistics, public-health instruction, child hygiene and 
public-health nursing, surveys and rural hygiene, and 
social hygiene. Here again the work of the divisions 
practically coincides with the principal functions of the 
department, and the expenditures of the divisions repre- 
sent the expenditures for the various functions of the 
department. 

Under the provisions of the Virginia and South Caro- 



CLASSIFICATION OF INFORMATION 43 

lina budget laws the first budgets of these states (1920) 
set up a functional classification of the activities of each 
administrative agency. This classification, of course, dif- 
fers for each agency ; it cannot be standardized. In most 
instances, it has no definite relation to the internal or- 
ganization of the agency. It is largely an arbitrary divi- 
sion of the activities of the agency and is not based upon 
the structural organization of the work. While it un- 
doubtedly has value from the standpoint of the prepara- 
tion of an administrative work plan and the keeping of 
cost records, it assumes for purposes of accounting con- 
trol over expenditures an internal organization that does 
not exist. The question of appropriating to functional 
divisions that do not represent actual organization units 
or entities will be taken up later (Chapter IX). 

Functional classification, as applied to the activities of 
state and city governments, should be used as a basis for 
determining the organization of governmental work into 
a few major units or departments and of subdividing 
these into bureaus and divisions. A functional classifica- 
tion of expenditures may show poor administration, but 
it does not fix responsibility for such administration un- 
less the functional group coincides with the organiza- 
tional group or unit. 

In states and cities having properly organized and in- 
tegrated administrative structures, the organization unit 
has a definite relation to the functional classification, 
which may be shown as follows: 

I. — Function (general) : e.g., protection of public 

health 
A. — Organization unit : department of public 

1. — Function (intra- health 

departmental) : sanitation 

a. — Organization unit: bureau of sanitation 



44 BUDGET MAKING 

Classification by Organization Units 

Any department, bureau, division, institution, or 
agency of the state or the city government, the work of 
which is organized under a responsible head may be re- 
garded as an organization unit. The essential character- 
istic of an organization unit is fixed and definite responsi- 
bility for work done. The size of the activity is not of 
prime importance; there is no limit as to how far sub- 
division may be carried so long as the final working unit 
is not broken up. The work of the state or the city, when 
classified by organization units, will show the depart- 
ments, bureaus, divisions, and subdivisions of govern- 
ment in their proper relation to each other and to the 
whole governmental organization. 

Classification by organization units, that is, classifica- 
tion so as to show definite lines of responsibility, is of 
basic importance in financial control. For this reason it 
should be regarded as the primary classification for pur- 
poses of budget making. Then personal responsibility is 
emphasized, and it is possible to present in the budget a 
complete outline of the governmental organization. Such 
a classification not only enables control to be exercised 
over expenditures, but it enables comparisons of cost to 
be made between functionally related units of government 
for one or more years. 

Classification by Objects 

Thus far no classification of expenditures upon a 
strictly object basis has been devised. While practically 
every state and city uses the so-called object classifica- 
tion of expenditures, there is a wide divergence of opin- 
ion as to what constitutes such a classification. There 



CLASSIFICATION OF INFORMATION 45 

is a total lack of agreement among accountants and bud- 
get specialists upon what should constitute even the ma- 
jor titles of such a classification. Oftentimes the titles 
used do not show the objects of expenditure, but are based 
upon the use or purpose of the object rather than the ob- 
ject itself, or upon the function to which the object is to 
be applied, or upon the character of the expenditure. 
New Jersey, for example, provides that the expenditure 
estimates be grouped as follows: (1) maintenance— 
food, clothing, fuel and power, supplies, incidentals; (2) 
salaries; (3) repairs and replacements; (4) miscellane- 
ous, including equipment, insurance, fixed charges, and 
so forth; and (5) new buildings. This classification is 
not only incomplete and very indefinite in some of its 
titles, but confuses both the character and objects of ex- 
penditure. But even if a perfectly consistent object clas- 
sification of expenditures were devised, perhaps, for prac- 
tical application, it would not be at all desirable. 

What is needed for budget-making purposes is a clas- 
sification of the services and commodities to be purchased 
and of the obligations to be met by the government. For 
the sake of a better term this may be called an object 
classification, although it would not be constituted en- 
tirely upon an object basis. When such a classification, 
designating the services, commodities, and obligations for 
which expenditures are to be made, is coupled with the 
organization unit classification in making appropriations, 
it is then possible to exercise proper control over expen- 
ditures. By using these two classifications, responsibil- 
ity for spending is fixed in the head of the organization 
unit and the essential elements in making contracts and 
purchases, that is, the things to be bought are known (see 
Chapter IX). 



46 BUDGET MAKING 

Among the object classifications now used by the 
states, those of Illinois, Ohio, and New York deserve spe- 
cial attention because of the extent to which they have 
been worked out. The Illinois classification was devised 
by the department of finance shortly after its creation in 
1917. In order to extend the application of the classifica- 
tion to those departments and agencies outside the code 
departments, it was made statutory (Finance code, Laws 
of 1919). It is frankly based upon both the objects and 
purposes for which expenditures are made. It is used in 
making up the expenditure estimates, in standardizing the 
items of appropriation measures, and in controlling all 
departmental expenditures through the department of 
finance. It provides for the classification of items under 
eleven general titles as follows: (1) salaries and wages; 
(2) office expenses, covering the running expenses of an 
office and including consumable supplies; (3) travel, in- 
cluding charges and expenses incident to traveling; (4) 
operation, covering expenditures for the conduct, main- 
tenance, and upkeep of plants, institutions, and agencies ; 
(5) working capital, as applied to institutional manu- 
facturing and selling of articles; (6) repairs, both of 
buildings and of equipment; (7) equipment, covering ex- 
penditures for all personal property of a non-consumable 
nature; (8) permanent improvements, including build- 
ings and other structures, but not including equipment; 
(9) land; (10) contingencies, covering expenditures not 
included above or for deficiencies; and (11) reserve, in- 
cluding expenditures for public purposes that are un- 
foreseen by the legislature. The first nine of the above 
divisions are used as titles of the standard accounts kept 
by the department of finance. The appropriations made 
under the last two divisions are usually allocated to some 



CLASSIFICATION OF INFORMATION 47 

of the preceding divisions before any expenditures are 
made from them. 

Under the administrative reorganization plan of Illi- 
nois there is a special advantage to enacting this classi- 
fication into law, since the department of finance is there- 
by enabled to exercise a certain amount of control over 
the expenditures of departments and agencies not under 
the code administration. Besides, it makes for uniform- 
ity in the presentation of budget data to the department 
of finance. As a general proposition, however, it does 
not seem wise to attempt to write even the outline of an 
expenditure classification into law. Already the experi- 
ence of states in budget making indicates pretty clearly 
that practical application will point to needed changes in 
classification from time to time. If the classification is 
rigidly fixed by law, then these changes cannot be made 
without considerable delay necessitating the approval of 
the legislature. 

The Ohio classification has been adopted by both Vir- 
ginia and South Carolina, with some slight rearrange- 
ments and the addition of one or two new titles, such as 
pensions and contingencies. It provides for eight groups, 
called standard account titles, as follows: (1) personal 
service, divided into salaries, wages, and unclassified; 
(2) supplies, including food, forage, fuel, office, medical, 
laundry, refrigerating, educational, agricultural, motor 
vehicles, and general plant; (3) materials — highway, 
building, and general plant; (4) equipment, including of- 
fice, household, medical, livestock, motorless vehicles, mo- 
tor vehicles, clothing, educational, and general plant; 
(5) contract and open-order service, including repairs, 
motor-vehicle repairs, water, light, heat, and power, jani- 
torial, transportation, communication, contingencies, and 



48 BUDGET MAKING 

general plant; (6) fixed charges and contributions, cov- 
ering rent, insurance, and contributions; (7) additions 
and betterments, including lands, buildings, major and 
initial equipment, and non- structural improvements ; and 
(8) rotary funds, or working capital. Some titles, it will 
be seen, indicate the nature of the service, for example 
contract and open-order service, or the character of the 
expenditure, for example fixed charges and contributions, 
or the use of the money to be appropriated, for example 
rotary funds. In other words, the classification does not 
adhere strictly to objects. It requires extended defini- 
tions to determine the limits of each title, and also a code 
of the commodities purchased so as to enable the gov- 
ernmental agencies in making out their estimates to place 
the objects under the proper title. After making his ac- 
counts conform to the classification and keeping them on 
that basis for five or six years, the state auditor claims 
that the classification is unsatisfactory and should be 
abandoned. 1 

Under the law the New York classification is pre- 
scribed by the comptroller's office. The classification 
used at present by departments differs somewhat from 
that used by institutions. The classification for depart- 
ments is as follows: (1) personal service; (2) food; (3) 
fuel, light, power, and water; (4) printing; (5) adver- 
tising; (6) equipment and supplies; (7) materials; (8) 
hired horses and vehicles; (9) traveling expenses; (10) 
communication; (11) fixed changes and contributions; 
(12) general plant service; (13) repairs and alterations 
to buildings, repairs and replacements of mechanical 
equipment; (14) rent; (15) construction or permanent 
betterments; and (16) acquisition of real estate. For 

i Auditor's Report, Ohio, 1919, p. 7. 



CLASSIFICATION OF INFORMATION 49 

institutions the classification is as follows: (1) personal 
service; (2) food; (3) fuel, light, power, and water; (4) 
clothing; (5) furniture, furnishings, and household sup- 
plies; (6) medical and surgical care, supplies, and equip- 
ment; (7) farm and garden; (8) roads, grounds, and 
walks; (9) general administration; (10) office expenses; 
(11) traveling expenses; (12) fixed charges and contribu- 
tions; (13) repairs and alterations to buildings, repairs 
and replacements of mechanical equipment ; (14) construc- 
tion and permanent betterments; and (15) acquisition of 
real estate. These general titles for institutional estimates 
are subdivided as far as detail is desired. For example, 
food is divided into breadstuff s and cereals; coffee, tea, 
cocoa, etc.; dairy products; fish, fresh; fish, salt and 
canned; meats, fresh; meats, salt, smoked, and canned; 
poultry; fruits, canned and jellies; fruits, dried; fruits, 
fresh ; spices, extracts, etc. ; sugar, syrup, etc. ; vegetables, 
canned; vegetables, dried; vegetables, fresh; and yeast, 
baking powder, etc. It will be noted that this classifica- 
tion is not strictly an object classification of expendi- 
tures, but is based upon character, use, and purpose, as 
well as object. 

A recent Idaho law 2 requires the state auditor to use 
an object classification in keeping accounts and reporting 
expenditures that is adapted to the requirements of the 
bureau of budget for budget-making purposes. The 
classification prescribed in this law is as follows : (1) per- 
sonal services; (2) services other than personal; (3) ma- 
terials; (4) supplies; (5) equipment; (6) structures and 
non-structural improvements; (7) land; (8) other cap- 
ital outlays; (9) fixed charges and contributions; (10) 
pensions; (11) losses and contingencies; and (12) pay- 

2 Chapter 103, Laws, 1921. 



50 BUDGET MAKING 

ments as agent. This is certainly a mixed classification. 
Just what the class "services other than personal" com- 
prehends is not clear. It may include all expenditures 
not included in the first class — personal services ; in fact, 
this is the way it is used in the city of Minneapolis. Here, 
however, it includes what is commonly called "contrac- 
tual services/ ' or transportation, communication, print- 
ing, etc. Class eight is not clear, but is supposed to in- 
clude, among other things, the payment of debt. "Fixed 
charges' ' is a character designation. The last class, while 
perhaps necessary for accounting purposes, is unneces- 
sary for budget-making purposes. 

Among the cities the classifications used by Dayton and 
St. Paul are worthy of note. The Dayton classification 
is used rather widely over the country, especially by 
other city-manager cities. It is as follows: (1) personal 
service; (2) contractual services; (3) sundry charges; 
(4) supplies; (5) materials; (6) equipment; and (7) 
lands, buildings, and structures. "Sundry charges" is 
made the catch-all class; it includes contributions, debt 
service, imprest cash, pensions, refunds, etc. The St. 
Paul classification goes considerably more into detail and 
adheres fairly well to an object basis. It is as follows : 
(1) salaries and wages; (2) contractual services; (3) ma- 
terials; (4) supplies; (5) equipment; (6) contributions; 
(7) pensions and compensations; (8) taxes and special 
assessments; (9) judgments and compromise; (10) re- 
funds and repayments; (11) land; (12) buildings, struc- 
tures and improvements; (13) payments to other funds; 
(14) interest; (15) redemption of debt. The eighth class 
includes expenditures for taxes on city property not ex- 
empt and special assessments on exempt property. Class 
13 is mainly for bookkeeping purposes. 



CLASSIFICATION OF INFORMATION 51 

It will be seen from the above examples that states and 
cities are using for budget purposes not purely object 
classifications but classifications that indicate the charac- 
ter of the service, or the purpose to which the object is to 
be applied, as well as the object itself. For stores records 
the object classification may be regarded as sufficient, but 
for appropriation purposes something more than a strict 
object classification is needed— services of various kinds 
must be purchased as well as goods, and obligations must 
be met. These must be classified just the same as the 
things that are clearly commodities or goods. So, for 
budget-making purposes, there should be a classification 
that is expressed in terms of services and commodities 
to be purchased and of obligations to be met, that is, to 
state it another way, in terms of purchases and payments. 
The titles and sub-titles of such a classification are as 
follows : 



1. Personal services: 

la. Salaries and wages 

(a) Regular 

(b) Temporary 

lb. Other compensations 

2. Supplies and materials: 
2a. Food 

2b. Forage 

2c. Fuel (coal, gas, and oil) 

2d. Clothing (personal and household linens) 

2e. Office supplies (does not include printing, binding, etc.) 

2f. Cleaning and toilet supplies 

2g. Refrigerating supplies 

2h. Medical and laboratory supplies 

2i. School supplies 

2j. Agricultural supplies 

2k. Other supplies and materials 

3. Communication and transportation (services) : 
3a. Postage 

3b. Telephone and telegraph 
3c. Freight and express 



52 BUDGET MAKING 

3d. Traveling expenses 

(a) Transportation 

(6) Hotel 
3e. Hired horses and vehicles 

4. Subsistence, care, and support (services) : 
4a. Subsistence and support of persons 
4b. Subsistence and care of animals 

4c. Storage of vehicles 

5. Printing, binding, and advertising (services) : 
5a. Printing 

(a) Departmental reports and bulletins 
5b. Engraving 
5c. Lithographing 
5d. Binding 
5e. Advertising 
5f. Publication of notices 

6. Heat, light, power, and water (services) : 
6a. Furnishing heat 

6b. Furnishing light 
6c. Furnishing power 

(a) Electricity 
6d. Furnishing water 

7. Repairs and replacements: 

7a. Repairs to buildings and other structures 
7b. Repairs and replacements of equipment 

8. Rents: 

8a. Of buildings and offices 
8b. Of equipment 

9. Insurance : 

9a. On buildings 
9b. On stores 

10. Refunds, awards, and indemnities 

11. Interest 

12. Pensions and retirement salaries 

13. Grants and subsidies 

14. Equipment : 

14a. Furniture and fixtures 

14b. Instruments (medical and surgical) 

14c. Apparatus (physical and chemical) 

14d. Farm implements 

14e. Machinery 

14f. Livestock 

15. Buildings, new construction, and improvements: 
15a, Buildings and fixed equipment 

15b. Roads, walks, and pavements 
15c. Sewers and drains 



CLASSIFICATION OF INFORMATION 53 

15d. Bridges 

15e. Wharves and docks 

16. Land 

17. Payment of debt : 

17a. Sinking-fund installments 

17b. Debt payments not provided for by sinking funds 

18. Working capital (rotary funds) 

The titles of the above classification are largely self- 
explanatory. The subdivisions set down under a number 
of the titles indicate the general scope of the titles and 
are not meant to be exhaustive. Fees, commissions, re- 
tainers, and so forth are to be included under " other com- 
pensations'' of personal services. Supplies and ma- 
terials are combined under one title because the differ- 
ence between the two groups lies mainly in the nature and 
physical qualities of the commodities and substances and 
is not important from the standpoint either of informa- 
tion concerning cost or of control over the expenditures 
for such things. Furthermore, the distinction is not a 
valid one, since oftentimes materials become supplies 
through use. Titles 3, 4, 5, 6 and sometimes 7, represent 
services that are bought by the government, the labor and 
equipment necessary to render the service being fur- 
nished, and in most instances the supplies and materials 
as well. This group is sometimes designated by the title 
of "services other than personal,' ' "contract and open 
order," or "contractual services," titles that are to be 
avoided because they are misleading or indefinite in 
meaning. Titles 8, 9, and 10 are self-explanatory. Ee- 
funds (title 10) maybe regarded as reductions of revenue 
and not as expenditures, but wherever states or cities 
have legal provisions requiring appropriations in order 
to refund moneys erroneously paid into the treasury, it 
will be necessary to retain this title. Titles 11, 12, and 



54 BUDGET MAKING 

13 include expenditures that are commonly known as 
fixed charges. Since fixed charges indicate the character 
rather than the object or purpose of expenditure, it has 
been avoided as a title in this classification. Titles 14, 
15, ancf 16 are explained by the subdivisions under each. 
Title 17, payment of debt, includes only the redemption of 
debt and not the payment of interest. Working capital 
(title 18) covers expenditures made from rotary or re- 
volving funds set aside for manufacturing purposes. A 
number of states and cities have constituted such funds 
out of which expenditures are made to supply prisons 
and other institutions with raw materials for the manu- 
facture of goods. A title for contingencies has been pur- 
posely omitted, it being proposed (Chapter IX) that ap- 
propriations to organization units for all titles under 
current expenses be made in such manner as to be trans- 
ferable. Besides, the budget-making authority should 
have one sum set aside by each budget out of which any 
unforeseen needs that may arise in any of the depart- 
ments or institutions can be met. 

Objection may be raised to the inclusion of as many as 
18 main titles in an expenditure classification, but it must 
be borne in mind that only a very few of the organiza- 
tion units of state and city governments will have such a 
variety of expenditures as to require the use of all the 
titles. Probably the majority of organization units will 
not require the use of more than half of these titles. 

Classification by Character 

' As has been pointed out in the preceding chapter, after 
the services and commodities used by each organization 
unit in carrying on its work have been determined and 
classified, and the expenditures required for the same 



CLASSIFICATION OF INFOKMATION 55 

have been ascertained, it is then necessary to know the 
character of these expenditures as an index to the pos- 
sible means of financing them. In other words, it is neces- 
sary to know: (1) how much is needed annually to carry 
on the current work of the organization unit, and (2) how 
much is needed each year by the organization unit for in- 
vestment in property of a lasting nature, such as lands, 
buildings, and equipment. The question of whether ex- 
penditures should be met out of current revenues or from 
borrowings should be decided mainly upon the basis of 
these distinctions. For this reason the two groups should 
be defined as clearly as possible. When it is decided to 
finance expenditures by borrowing and debt obligations 
have once been incurred, then it is important to know (3) 
how much is needed each year towards meeting the out- 
standing debts. These three groups show the expendi- 
tures for current running expenses, the expenditures for 
property and improvements from which benefits accrue 
to the future, and the expenditures to extinguish debts 
contracted in the past. 

The New York comptroller's office uses a character 
classification that sets up expenditures under three main 
heads, namely, current expenses, including the cost of ad- 
ministering, operating, and maintaining the organization 
unit; fixed charges and contributions, including interest, 
indemnities, pensions, retirements, and prizes ; and cap- 
ital outlays, including the construction of buildings and 
improvements, and the acquisition of land. Virginia and 
South Carolina have adopted character classifications for 
budget purposes that divide the expenditures for organ- 
ization units between operation and capital outlay. In 
Dayton the city expenditures are divided into two char- 
acter groups : expense, including all expenditures for cur- 



56 BUDGET MAKING 

rent administration, operation, and maintenance; and 
capital outlay, including all expenditures that increase 
the capital assets of the city. 

Since the grouping of expenditures by character is 
principally of value in budget making as a means of de- 
termining the financing policy, it is desirable, as has been 
pointed out already, to divide expenditures into at least 
three groups. These may be designated as: (1) current 
expenses and fixed charges, (2) acquisition of property, 
and (3) redemption of debt. Current expenses and fixed 
charges include overhead and operating expenses, upkeep 
of property, and definite charges accruing from year to 
year. Acquisition of property embraces expenditures 
for land, improvements to land, buildings, and equip- 
ment. Eedemption of debt includes all payments to meet 
the principal of debts. 

From the standpoint of policy, the current expenses 
and fixed charges group includes expenditures that should 
be met out of current revenues and should not be deferred 
if a sound financing policy is to be maintained by the 
government. The second group, acquisition of property, 
includes those expenditures that are converted into cap- 
ital assets and from which benefits accrue to the future. 
The expenditures of this group may be met by borrow- 
ings. However, it is not considered good policy to bor- 
row to purchase equipment unless it is bought in such 
large quantities as to increase unduly the expenditures 
of a single year, or is for the initial equipping of a build- 
ing or plant. Keplacements and renewals should always 
be paid for out of current revenues. The third group, 
redemption of debt, includes the expenditures needed to 
satisfy debt obligations that have been entered into in 
the past. 



CLASSIFICATION OF INFORMATION 57 

The character classification of expenditures for budget- 
making purposes should then appear as follows : 

I. Current expenses 
II. Fixed charges 



III. Acquisition of property 

IV. Redemption of debt 



The relation of this classification to the object classifica- 
tion set forth in the preceding pages will appear by refer- 
ence to the composite classification in subsequent pages of 
this chapter. 

Classification by Funds 

The general need for classifying expenditures by funds 
has been pointed out in the preceding chapter. Prac- 
tically every state and municipal government has charge 
of moneys that may not be expended for general govern- 
mental purposes, such as, current revenues set aside for 
special purposes, gifts for particular purposes, and 
money obtained by the sale of bonds. These usually 
constitute separate funds that must be taken into ac- 
count in making expenditures. This necessitates the 
keeping of accounts and the rendering of reports cover- 
ing the receipts and expenditures of each such fund. It 
is necessary, in making up the budget, to know the con- 
ditions and limitations attached to each fund with refer- 
ence to its use and availability for appropriation by the 
legislative body, as well as the receipts into the fund. 

All states and practically all cities have what is com- 
monly called a " general fund" that is available for any 
purpose \o which the legislative body may see fit to apply 
it. All receipts from revenues not applicable by law or 
contractual agreement to a specific purpose go into the 



58 BUDGET MAKING 

general fund. Besides this fund, practically all of the 
states and cities have what are known as ' ' special funds ' ' 
that are established for a specific expenditure or class of 
expenditures. Each such fund that is set aside curtails 
the general fund and, at the same time, restricts the gen- 
eral powers of the legislative body to appropriate the 
government's income. The primary purpose of setting 
aside special funds for certain work is to make the financ- 
ing of such work, as compared with other work of the 
government, more secure. From the standpoint of the 
budget, special funds usually have the disadvantage of 
removing the estimates of the work financed by them 
from the scrutiny and consideration on the part of the 
budget-making authority, which is necessary to produce 
a well balanced budget plan. In Virginia, for example, 
only about half of the state's income goes into the gen- 
eral fund, and it is mainly concerning the expenditures 
from this fund alone that the governor makes recom- 
mendations to the legislature under the budget law. Fur- 
thermore, special funds usually amount to a permanent 
authorization to expend, a kind of indefinite and continu- 
ing appropriation. Thus, by the creation of special funds, 
a legislature can tie the hands of succeeding legislatures, 
taking away their power effectively to criticize and freely 
to pass upon expenditures made from such funds. 

Besides the general fund and the special expendable 
funds noted above, the other general classes of govern- 
ment funds are sinking funds, working capital funds, en- 
dowment funds, and suspense funds. Sinking funds are 
moneys set aside for the redemption of long-term bonds 
and are commonly required by law to be held separate 
from all other funds in the treasury. Such funds are 
necessary wherever sinking fund bonds are in use. 



CLASSIFICATION OF INFORMATION 59 

Working capital funds are provided either by appro- 
priation or by borrowing for carrying on manufacturing 
processes or construction work conducted mainly by pub- 
lic institutions. Such funds are usually replenished by 
proceeds from sales of goods or by transfers from other 
funds. Endowment funds cannot be expended, but the 
income from the investment of these funds can be ex- 
pended for a specified purpose. Suspense funds con- 
tain certain receipts usually available for specific pur- 
poses that are temporarily held awaiting distribution. 
This last class of funds, however, is very rarely found 
in government finances, and for that reason is omitted 
from further consideration. 

Expenditures may then be classified by funds for pur- 
poses of budget making as follows : 

I. General fund 

II. Special expendable funds 

III. Sinking funds 

IV. Working capital funds 
V. Endowment funds 

Suggested Composite Expenditure Classification for 
Budget-Makmg Purposes 

It has already been pointed out that in order to fix re- 
sponsibility for expenditures the organization-unit clas- 
sification should be regarded as the primary classifica- 
tion. When governmental activities are properly organ- 
ized, the general functions of government will be shown 
as organization units and thus the functional classifica- 
tion will practically coincide with the organization-unit 
classification. Furthermore, it is useless as a means of 
financial control to set up functional groupings of ex- 
penditures that are not based upon definite and existing 
organization units with responsible heads. The expendi- 



60 BUDGET MAKING 

tures under each organization unit should be shown in 
terms of objects and of character. It is necessary, as has 
been pointed out, to know the objects needed, that is, the 
services and commodities to be bought and the obliga- 
tions to be met, in order to estimate properly and cor- 
rectly for the future. Then these objects should be 
divided according to the character of expenditure for 
financing purposes. The expenditures, actual and esti- 
mated, for any department, bureau, division, or institu- 
tion, when set up under these two classifications, should 
be in the order of the titles in the composite classification 
given below. However, all titles would not appear under 
every organization unit ; only those would appear under 
which expenditures had been made or were going to be 
made. 

EXPENDITURE CLASSIFICATION FOR AN ORGANIZATION UNIT ARRANGED 

SO AS TO SHOW BOTH THE CHARACTER AND OBJECTS (SERVICES, 

COMMODITIES, AND OBLIGATIONS) OF EXPENDITURE 

I. Current Expenses: 

1. Personal services 

2. Supplies and materials 

3. Communication and transportation (services) 

4. Subsistence, care, and support (services) 

5. Printing, binding, and advertising (services) 

6. Heat, light, power, and water (services) 

7. Repairs and replacements 

8. Rents 

9. Insurance 

10. Refunds, awards, and indemnities 
II. Fixed Charges: 

11. Interest 

12. Pensions and retirement salaries 

13. Grants and subsidies 
III. Acquisition of Property: 

14. Equipment 

15. Buildings, new construction, and improvements 

16. Land 

IV. Redemption of Debt : 

17. Payment of debt 



CLASSIFICATION OF INFORMATION 61 

In connection with the above composite classification, 
or in a summary, there should be indicated the fund or 
funds out of which the expenditures of each organization 
unit have been or are to be met. This may be set up 
somewhat as follows : 3 





Actual 


Estimated 


Total expenditures for organization unit 


000000 


000000 


Funds paid from: 


00000 

0000 

000 


00000 


Special expendable funds (list eacl., 

Endowment funds (list each) 


0000 
000 






Total 


000000 


000000 







II. Revenue Classifications 

The income of the government is designated by prac- 
tically all state budget laws as " revenue.' ' The term 
revenue, therefore, in budget usage has come to be almost 
synonymous with income, and to mean the reverse of 
expenditure or outgo. However, all moneys that may 
come into the state or city treasury cannot be regarded 
as revenue in the sense in which it is here used. The 
state or municipal treasury may secure money by the sale 
of bonds and this money may be used to meet the current 
expenses of the government, but just the same the state 
or city must obligate itself to raise at some future time 
an equal amount of money plus a certain amount for 
interest charges. In other words, borrowing is a means 
of deferring or of spreading over a longer period the 
raising of revenues; it enables the government to secure 
money immediately for capital needs or for emergen- 



s See recapitulation sheet of estimate forms, Chapter V. 



62 BUDGET MAKING 

cies without at the same time increasing unduly the 
burden of taxation. States or municipalities may also 
levy special assessments for public improvements or for 
public services upon the localities benefited thereby, but 
the money derived from such assessments is not revenue 
in the sense in which the term is here used. Whenever 
money accruing from a special assessment is paid into 
the state or the city treasury, it automatically falls into 
a special fund, since it cannot be expended for any other 
purpose than that for which the assessment is levied. It 
is not available for meeting the general costs of govern- 
ment, or for providing for all general public needs. Spe- 
cial assessments amount to this : the government directs 
the doing of a piece of work in a locality and then, by 
virtue of its taxing power, assesses the cost of the work 
against the land of the persons benefited by it; the 
property owners are not contributing money to the sup- 
port of the government, but are supposed to be fully 
compensated by the benefits conferred upon them by the 
improvements or by the services for which the assess- 
ments are made. Also certain funds, sometimes called 
" trust' ' funds, may come into the state or the city treas- 
ury for which the government is merely custodian. Such 
funds are not to be regarded as revenue. This does not 
mean, however, that no account is to be taken in the 
budget of moneys secured by borrowing or by special 
assessments, or receipts into funds of the kind just men- 
tioned. Eather it means that moneys derived from such 
sources, or belonging to such funds, are not to be con- 
sidered a part of the ordinary revenue that can be used 
to finance generally the current work of government. 
Furthermore, it is useless to attempt for budget pur- 
poses to compare other than the ordinary revenue of 



CLASSIFICATION OF INFORMATION 63 

the government with that of preceding years. Only 
on this basis can the true cost of government be ascer- 
tained. 

Revenue Classifications Essential for Budget Purposes 

For purposes of budget information, the revenues 
available for meeting the general cost of government 
should be classified so as to set forth: (1) the sources 
from which revenues are derived; (2) the funds into 
which the revenues from the various sources go when 
paid into the treasury; and (3) the agency or agen- 
cies collecting the revenues from the different sources. 
The first may be designated a classification of reve- 
nues by sources, the second by funds, and the third 
by collecting agencies. The classification of revenues by 
collecting agencies, however, is not so important from 
the standpoint of the budget as the others are. When 
all moneys are required to be turned into the state or 
city treasury, such a classification shows merely respon- 
sibility for collection. 

Classification by Sources 

Practically all states and cities designate their reve- 
nues by the sources from which they come, but only a 
few attempt to make any classification of such sources. 
Usually they are set down seriatim, no attempt being 
made to group the different kinds together. Perhaps the 
best example of a revenue classification by sources is the 
one used in the Ohio budget prepared in 1919. It shows 
the following classes of revenues according to sources: 
(1) sales, (2) service payments, (3) capital income, 
(4) fines and penalties, (5) contributions, (6) admis- 
sions, (7) miscellaneous, and (8) taxes. The first class 



64 BUDGET MAKING 

includes revenues from the sale of farm products and 
institution-made goods; the second class includes fees 
paid by patients in state institutions, examinations, in- 
spections, tuitions, etc.; the third class includes in- 
terest, rentals, and proceeds from the sale of land; and 
the sixth class includes admission fees to state fairs and 
institutions. The other classes are self-explanatory. It 
will be seen that this classification, while suited to the 
particular needs of Ohio, is not applicable in general to 
other states and municipalities. The classes are not 
clearly defined, hence a miscellaneous group is set up as 
a catch-all. 

A general classification of revenues by sources is sug- 
gested below. It is designed to be used in classifying the 
revenues of all states and cities for budget-making pur- 
poses. In case some of the classes are not represented 
among the revenues of a particular state or city they 
may be dropped, retaining only those classes under which 
revenues are accrued. The sub-heads under each class 
are not meant to be exhaustive, but are given merely to 
indicate the general scope of each class. 

1. Taxes : 

la. Property taxes (specify) 
lb. Poll taxes 
lc. Income taxes 
Id. Corporation taxes (specify) 
le. Inheritance taxes 
Etc. 

2. Licenses : 

2a. Motor vehicle licenses 
2b. Business licenses (specify) 
2c. Professional licenses (specify) 
Etc. 

3. Franchises : 

3a. Public utilities (specify) 

4. Privileges and Permits 

(Charges for minor rights — specify) 



CLASSIFICATION OF INFORMATION 65 

5. Fees: 

5a. Fees for legal services 
5b. Fees for inspectional services 
5c. Fees for technical services 
Etc. 

6. Rents: 

6a. Buildings 
6b. Real Estate 
Etc. 

7. Interest, Premiums and Discount : 
7a. Interest 

7b. Premiums 
7c. Discount 

8. Sales of Services and Commodities: 

8a. Services of governmental enterprises 

8b. Sale of manufactured goods of institutions 

8c. Tolls. 

9. Fines and Forfeits: 
9a. Fines 

9b. Forfeits 
9c. Penalties 

10. Grants and Donations 

(Specify) 

11. Escheats (in case of state governments) 

(Specify) 

Such a classification as the above enables the legisla- 
tive body and the people to know at once from what gen- 
eral sources the government's revenues come. It is 
obvious that the first class, namely taxes, supplies the bulk 
of the revenue of any state or city. This is the class, too, 
in which recently most new sources of revenue have been 
found. It will be seen also that the first five classes in- 
clude practically all of those revenues that the legisla- 
ture has the power to increase or decrease at will. The 
revenues falling in the other six classes accrue largely as 
a result of the operation of the government. 

Classification by Fwnds 

Next in importance to showing the sources from which 
revenues are to be derived is a classification of revenues 



66 BUDGET MAKING 

according to the funds into which they fall when paid 
into the state or the city treasury. Nearly every state 
designates certain revenues that are to be set aside for 
specific purposes, such as the building and maintenance 
of roads and the running of schools. These constitute 
the special expendable funds already discussed. For 
example, Illinois has the following special funds: (1) fire 
prevention fund, (2) University of Illinois fund, (3) 
Illinois and Michigan Canal fund, (4) common school 
fund, (5) road fund, (6) Federal aid fund, (7) waterway 
fund, and (8) State bond road fund. All moneys paid 
into the Illinois state treasury, not belonging to one of 
these special funds, go to constitute the general fund out 
of which the legislature may appropriate for any pur- 
pose. 4 It is, therefore, very important for budget-making 
purposes that not only the sources of revenue and the 
amounts derived from each source be known, but also the 
fund or funds into which the revenue from each source 
falls and the restrictions upon expenditures from such 
fund or funds. The following form is suggested for the 
classification of revenues by funds : 

I. General Fund: 

1. Taxes 

2. Licenses 

3. Franchises 

4. Rents 
Etc. 

II. Special Expendable Funds: 

A. Road fund 

1. Taxes 

2. Licenses 
Etc. 

B. School fund 
1. Taxes 

Etc. 

C. Etc. 

* State Finance Code, Laws, 1919. 



CLASSIFICATION OF INFORMATION 67 

III. Sinking Funds : 

1. Taxes 

2. Licenses 
Etc. 

Classification by Collecting Agencies 

The classification of revenues according to the collect- 
ing agency, while not of primary importance for pur- 
poses of financial planning, is important from the stand- 
point of showing responsibility for collection and in help- 
ing to determine the cost of collection. Nearly all state 
budgets show their revenues classified by collecting 
agencies. Perhaps the best examples of such classifi- 
cation are to be found in the first budgets of Illinois and 
Virginia. The following arrangement is suggested in 
classifying revenues for states by collecting agencies: 

I. Department of State : 

1. Taxes 

2. Licenses 

3. Franchises 

4. Fees 
Etc. 

II. Department of Agriculture: 

1. Licenses 

2. Privileges and Permits 

3. Fees 

4. Fines 
Etc. 

III. Department of Public Welfare : 

1. Rents 

2. Sales of Services and Commodities 
Etc. 

IV. Etc. 



CHAPTER V 
THE ESTIMATE FORMS 

Having determined the character of the information 
required in preparing the budget and the classifications 
needed in arranging this information so it can be easily- 
comprehended and used to the best advantage, we come 
to the question of the forms and methods to be used in 
collecting and bringing together the budget information. 

Expenditure Estimate Forms in Use 

Only in a few cases do state budget laws attempt to 
specify the information to be furnished by the written 
expenditure estimates, thus leaving the budget-making 
authority free to prescribe whatever forms may seem 
best suited to secure the information needed in preparing 
the budget. A notable example is the New Jersey budget 
law, which specifies in detail the information the esti- 
mates are to furnish. Already the experience of this 
state indicates pretty clearly that specific requirements 
in the budget law as to the form of the estimate blanks 
are superfluous, since they do little more than cumber 
the budget-making authority. The budget-making au- 
thority should be free to determine the form of the esti- 
mates and the character of the detailed information they 
are to present; then changes can be made as often as 
experience or conditions dictate without having to wait 
until the law is amended. Of course, when a satisfactory- 
set of estimate forms has once been adopted, it is not 
wise to change the essential features any more than is 



THE ESTIMATE FORMS 69 

absolutely necessary, because such changes render it dif- 
ficult to make comparisons with the expenditures of pre- 
vious years. However, the details can always be varied. 

Since the expenditure estimate forms of Virginia, 
Illinois, Ohio, and New York are fairly representative 
of the different types of such forms used by the several 
states as well as the cities having budget procedures, 
they will be considered briefly at this point. 

In Virginia one form is used for all expenditure esti- 
mates. It is 17 x 22 inches in size and provides space at 
the top for the name of the agency making the estimate 
and the approval of its principal officer. It is intended 
to be filled out by hand, although a wide-carriage type- 
writer might be used. Special emphasis is laid upon the 
budget classifications (see preceding chapter for discus- 
sion) ; all requested services and commodities must be 
classified by functions, by character, and by objects. Ac- 
count numbers and sub-classification of objects must be 
shown. Columns are provided for the appropriations 
and expenditures of the preceding year, the appropria- 
tions of the current year, the amounts requested for each 
year of the coming biennium, the increase or decrease of 
the amounts requested over the appropriations of the 
current year, and the governor's recommendations for 
each year of the coming biennium. Regardless of whether 
or not it is a stenographer, a ton of coal, an office desk, 
a new building, or a farm, the information requested is 
the same. While the title of the position or the name of 
the article is given, no further information is furnished 
beyond the amount appropriated and expended during 
the preceding year, the amount appropriated for the cur- 
rent year, and the amount requested for each of the two 
subsequent years. 



70 BUDGET MAKING 

The Illinois department of finance uses a separate esti- 
mate form for each of the eleven u standard appropria- 
tion accounts,'' and, in addition, a recapitulation sheet, 
a work program sheet, and a sheet for details and ex- 
planations (see preceding chapter, for list of Illinois 
standard accounts). These forms are 9x14 inches in 
size, that is, they are cut to fit an ordinary typewriter. 
Instructions for preparation are printed on the back of 
each sheet. The estimates are to be made in dollars only, 
and the recapitulation sheet is to be signed by the officer 
submitting the estimates. Under the first account, 
namely, salaries and wages, the title of each position 
must be filled in by the agency making the estimate, but 
the sub-classifications of most of the other accounts are 
printed on the sheets. The other information required 
by the estimates is practically uniform for all sheets: 
there is a column for the actual expenditures of the pre- 
ceding year, a column for the estimated expenditures of 
the current year, and a column for the estimates of each 
year of the coming biennium. Perquisites are also to be 
estimated on the form for salaries and wages. Increases, 
decreases, and new items are to be indicated on all forms 
except those for repairs, buildings, and land. 

The budget commissioner of Ohio used (1920) nine ex- 
penditure estimate forms, 1 one for each of the following 
titles: salaries; wages and unclassified; supplies; mate- 
rials; equipment; contract and open-order service; fixed 
charges and contributions; land, buildings, and fixtures; 
and recapitulation. Each form is 19x26 inches in size 
and is printed on heavy calendared paper. This makes 
them so unwieldy that they must be filled out by hand 

i The newly created department of finance (1921)* which assumes the 
powers and duties of the budget commissioner, will probably use similar 
forms. 



THE ESTIMATE FORMS 71 

rather than by the use of a typewriter. Instead of put- 
ting the estimates for both years of the biennium upon 
the same sheets, separate forms have been provided for 
each of the years, thus almost doubling the work of pre- 
paring the estimates, since each set duplicates the infor- 
mation of the other in all except the estimates for the 
particular year. The form for salaries asks for the title 
of the position under two columns— no change, and new 
position; section of law fixing salary; amount requested; 
comparison of request with current year rate; name of 
incumbent ; date of last increase ; and reason for increase. 
The form for wages and unclassified personal service 
requires the title of position or purpose ; the amount re- 
quested, showing number of days and rate per day ; and 
the expenditures made during each of the two preceding 
years and the first six months of the current year. The 
forms for supplies, materials, equipment, contract and 
open-order service, and fixed charges and contributions 
ask for the name of the commodity or service ; the amount 
requested, showing quantity, unit of measure and unit 
cost; and comparison with expenditures of the two pre- 
ceding years. The form for lands, buildings, and fixtures 
asks for land, the name of the tract, number of acres, 
location, date option expires, number of acres improved, 
present assessed value, buildings on tract, and amount 
requested ; for buildings whether new or remodeled, loca- 
tion, kind, basis of figures, and requested amount; and 
for equipment the name, location used, unit cost, kind 
and quantity, basis of determining quantity, and request. 
Each form provides space for remarks and supporting 
data. 

The joint legislative budget committee of New York 
uses four forms for expenditure estimates, one each for 



72 BUDGET MAKING 

personal service, maintenance and operation, new con- 
struction or permanent betterments, and recapitulation. 
The form for maintenance and operation is expanded 
into four sheets for the use of institutions, thus setting 
forth the sub-classification and itemization desired for 
such estimates. The sheets are 14x17 inches in size, a 
very convenient size for handling, and are perforated on 
left-hand margin for binding. Smaller sheets, Sy 2 x 14 
inches in size, are provided for explanations and sup- 
porting data with reference to the items contained on 
the estimate forms. The personal service form has 
columns asking for the title of position and compensa- 
tion rate; compensation for each of the two preceding 
years and for the current year; amount requested for the 
coming year ; name of incumbent ; commutation or main- 
tenance in addition to salary; and comparison of esti- 
mate with current year's rate. The form for mainte- 
nance and operation has columns requiring a statement 
of the purpose ; expenditures for each of the two preced- 
ing years; amount available for the current year and 
chapter of law authorizing amount; requests both for 
deficiency and the coming year ; and a comparison of the 
current year's expenditures with the coming year's esti- 
mates. The form for new construction or permanent 
betterments calls for a description of the work; authori- 
zations to date ; appropriations to date ; total contract 
liability ; new authorizations requested ; and new or addi- 
tional appropriations requested, showing the amount to 
be spent for work done by contract and the amount to be 
spent for work done by the agency making the request. 
Institutions are required to show per capita costs for the 
different classes of expenditures. The value of home 
products must also be shown on the recapitulation sheet. 



a 

i 

CO 

o 

■a 

CO 
<N 

d. 

a 



o 8 

<j a 



■s 




CO 


0) 




o 


K* 




p 


w 




w 

CO 




w 

w 

C 


*s 






11 




rt 


SW 



£ p< 










Memoranda 
(Leave 
Blank) 

It 






Budget- Making 
A u t h or i t y 's 
Recommenda- 
tion 


Amount 
1923- 
1924 

16 






Amount 
1922- 
1923 

15 






Increase ( -f ) 
or decrease 
(-) of Com- 
pensation 
Requested 
over that of 
Current 
Year 


1923- 
1924 

14 






1922- 
1923 

13 






Commutation 
or Mainte- 
nance i n 
Addition to 
Salary 


1923- 
1924 

12 






1922- 
1923 

11 




e 

u 

o 


^UOrilSOJ MSN,, 

jo „^ubobJ\.'„ Ajioadg ^ 
jo ^uaquinoui jo ' auiBjsj 






73 
<u 

03 

0> 

CT 
0> 

« 

S3 

.2 

03 

a 

01 

£ 
o 
D 


W6I-8Z6T q, 
'^unoray 






saaAojduig; jo -o^ oo 






SZ6I-ZZ6I ^ 
'^unouiy 






saaAojdurg; jo -o^ <s> 






ZZ61-IS6I *^ 9 A ^ 
^uajjnQ joj uoriBSuaduiOQ 






TS6T-0S6T 'M8A sno 
-iAajj joj uopBSuaduioQ 






uoriBsuaduioQ Suixi^j 

J8pj(j JO M.WJ Ol 80U8J9J3^J 






UOiq.BSU8dUIOQ 

jo a^By; puB 9r}ix 'uoi^isoj 










'ON «™U *- 





73 



74 BUDGET MAKING 

Some of the states have separate estimate forms for 
the departments and institutions. For example, Massa- 
chusetts has a set of forms for departments, a set for 
institutions, and a set for normal schools; while New 
Mexico has a set for departments and institutions in gen- 
eral, a set for educational institutions, a set for chari- 
table and penal institutions, and a set for departments 
with an independent income. 

Model Expenditure Estimate Forms 

It will be seen from the foregoing brief descriptions 
of the estimate forms of four typical states that there is 
a wide divergence of opinion as to the number of esti- 
mate forms needed, the size of the sheets, the amount, 
character, and detail of the information required on the 
forms, and the methods of filling out the forms. Because 
of this diversity in practice and the apparent lack of 
proper appreciation among a large number of states and 
cities of just what information ought to be and can be 
shown on expenditure estimate forms, there is presented 
herewith detailed exhibits of a set of model expenditure 
estimate forms. 

Six forms are suggested for use. It is not considered 
possible to gather information of sufficient detail regard- 
ing all kinds of expenditures, especially for states and 
larger cities, by the use of a single form as is the practice 
in Virginia and cities like Detroit and Indianapolis. 
The character and details of information needed with 
regard to personal services are quite different from that 
needed concerning other current expenses, hence the rea- 
son for the separate Forms A and B. Likewise, the in- 
formation concerning property to be acquired is dif- 
ferent for each kind of property, that is, estimates for 




si 

•f P<gw 
2 wow 



egg 

1*1 

hl,Q 

s AM 

gaas 



ggg§g 
SBBBS 



^»-*io«oi*oooOHcqeo 









y* 








-a fl 




flrt 




Sm ,* 




l£ - 




O) c3 




^6 








fi 1 


£22 " 




i o s 


«< 




-*> 




ill 

ffl 8 










^ 








B 








3 








O ^ 








a *" 






■* 


•< 














o> 








Y 


-P +a 






CO 


Bo ® 






<N 

05 


PO ** 




T3 








A* 




«> 




$.H °* 




1 




g^ 




B 








O 1 








(U 




B 




« 




B 

O 00 




B 




a 




o 


CO 


«j 




.9 


OS 










'!-! 








a 




-ij -^ 




o 

ft 


IN 

C6 






ft 








<J 








S>> 








§.t3 "to 








OP** 




«*H » 






°S 






•■S3 "» 






B 8 






££ 




Appro- 
priation 

for 

Current 

Year, 

1921- 

1922 




T3 £ 0> bfi - 1 




Expen- 
diture 
for Pr 
cedin 
Year 
1920 
1921 

3 




>> 




-Ih © 




"S § 




a o& •« 




1 <s 




o 




a« 








5 





75 



76 BUDGET MAKING 

the purchase of land should cover certain details not 
related to either buildings or equipment, also estimates 
for buildings, new construction, and improvements re- 
quire a different type of information from that required 
for equipment or land. For this reason Forms C, D, and 
E have been devised. Forms D and E, however, can go 
on one sheet, since the number of estimates for such pur- 
poses from any agency will rarely require a whole sheet. 
Then a recapitulation sheet, Form F, is necessary for 
summary purposes. 

While these forms have been devised with special ref- 
erence to states, they are easily adapted to cities by 
merely changing the captions. If it is thought desirable 
to facilitate comparisons of the estimates with previous 
years' expenditures and appropriations, a column may 
be added to Forms B, C, and F showing increases 
(+) and decreases ( — ). 

These forms should be printed on a medium-weight 
paper, such that carbon copies can be made when the esti- 
mates are filled out on a typewriter. The paper should also 
be of good quality and texture to withstand the necessary 
handling in reviewing the estimates. The sheets need not 
exceed 20 x 20 inches in size. This should give sufficient 
space for all the columns indicated on the model forms 
and, at the same time, it will not be large enough to be 
unwieldy in size. An ordinary wide-carriage typewriter 
can then be used in making out the estimates. Only one 
side of the form should be written on, otherwise it is very 
difficult to make carbon copies. There should be a small 
margin, perforated for binding, on the left-hand side of 
the sheets. 

These forms have been devised for estimates covering 
a biennium, since most of the state legislatures meet bien- 



a> 

I 

"S 

OS 

CO 
(N 



a 
iS 

■a 

o 



23 



5 - .12 

ffl <S 



O I 

ceo 



O I 

■<C5 







« 3 



I ^ 






l"3 






M 



IN 



£ 2 



w 



So 



77 



78 BUDGET MAKING 

nially and therefore appropriate for two years. In the 
case of cities or of states in which the state legislature 
meets every year, the columns covering the estimates 
for the second year of the biennium are to be dropped 
from the forms. 

It will be seen that the data requested on the estimate 
forms follow the budget classification previously recom- 
mended (see preceding chapter). The recapitulation is 
made upon the basis of the titles of the object classifica- 
tion suggested. When Form B is used for institutions, 
the budget-making authority may indicate the sub-clas- 
sification and amount of detail required by printing in the 
second column, "Commodity or Purpose,' ' something 
like the following : 



2. Supplies and Materials: 
2a. Food 

Breadstuffs and cereals 
Coffee, tea, cocoa, etc. 
Dairy products 

Butter 

Cheese 

Milk 
Eggs 
Fruits, canned and jellies 

Dried 

Fresh 
Meats 

Beef, fresh 

Smoked, canned 

Fish, fresh 
Salted, canned 

Pork, fresh 

Salted, smoked, canned 

Poultry 
Spices, extracts, etc. 
Sugar, syrup, etc. 
Vegetables, canned 

Dried 

Fresh 



THE ESTIMATE FOEMS 79 

2b. Forage 

Bran 

Corn 

Fodder 

Grain 

Hay 

Oats 

Straw 
Etc. (following classification in preceding chapter) 

Such a sub-classification, as the above, could be set 
down for titles 3, 4, 5, and 6 of the main object classifi- 
cation. The other titles could then follow with sufficient 
space between each to have the items written in by the 
agency making the estimates. This would insure uni- 
formity in the submission of estimates from all institu- 
tions. A few states, notably Ohio, have attempted to 
secure uniformity by the use of a " code, ' ' showing where 
all commodities belong in the classification. This, how- 
ever, is an unnecessary refinement for the majority of 
states and cities, considering their present stage of 
budget development, and is not here recommended. The 
various groups of commodities should first be worked out 
carefully before much attention is given to the individual 
object or commodity. 

Sheets for Explanation of the Expenditure Estimates 

Each estimate form should be accompanied by a sheet, 
preferably the same size as the form, for explanation of 
the item numbers on the form. Each of these sheets 
should be captioned with the same classification title or 
titles as the form to which it relates, for example, per- 
sonal services, etc. It should also provide space for the 
name of the agency filing the estimates and for the num- 
ber of the sheet. All explanations on these sheets should 
be by item number, that is, the item number used on the 



<M 

-iH 

I 
CO 
<N 
& 
r-i 

■a 

CO 
CM 

o 

d. 

<N 
O 
rH 

CO 

a 














e3^ 






T3 « 












a£ 






<u eJ 






^d 












2 1 








o3 >jt3 








-^ s a 
bo-tf a 








23 <n *■< 






T3 3 O 






^^ £ 


ga ^ 






n £ 








£ a 


"5 i .. 






£ pi .3 


mou 
L923 
1924 

10 








< 






(OT3 o 


+> 






S^ft 


Amour 
1922- 
1923 

« 






O* f* ft 




s 


Esti- 
mated 
Total 
Cost 
of 
Project 




© 


■ 




k3 


Expend 
tures 

to 
Date 

7 






ta 






P^o~ 






ft-S °*-8 «* ^ 














+s 






.2^ 
1 § 


pi 
pi 
o «o 

a 
< 














& 






S 03 
pi£ 


1«sS «* 






« 


.■a J 
o 






fl 






.2 ■ 






ts eo 






o 






o 






Hi 






-tJ 






13 PI 
go© 






53 






MM - 

s £ p. 






q « a 






So 






££ 






H • 







80 



PLAN OF THE NEW STATE PENITENTIARY. 




COMM 



.OMMISSIONERS 

«/OHN Umberi 
JAmesA-Patten 
Ira C- Copley 



New Illinois State PcNiTeNTiAny 



ARCHITECT 

W-CARBy^ ZlMMEkMAN 



PLAN OF THE NEW STATE PENITENTIARY PROM THE ILLINOIS STATE 
BUDGET FOR 1921-1923 



THE ESTIMATE FORMS 83 

estimate form proper, and should be confined to as few 
words as possible, giving only the essential facts. On 
the explanation sheet, accompanying Form A, reasons 
should be given for salary increases or decreases, or new 
positions, and perhaps a brief statement of the employ- 
ment record and previous increases. On the explanation 
sheet, accompanying Form B, should be explained the 
items where increases over the past year are requested. 
On the explanation sheets, accompanying Forms C, D, 
and E, full supporting data should be given, or reference 
to the source of such data; for example, the architect's 
plans, figures, etc., should accompany requests for build- 
ings. 

When institutional construction is undertaken, a com- 
plete plan of the proposed plant should be presented. 
This is illustrated by the accompanying "plan of the new 
state penitentiary' ' reproduced from the Illinois state 
budget for the biennium beginning July 1, 1921, p. 342. 
As work progresses on this plan it is noted and explained 
by reference to the numbers. 

In constructing road systems and in laying out streets, 
maps should be presented showing the work completed, 
under way, and contemplated. The accompanying map, 
illustrating this feature, is reproduced from the Wyom- 
ing state budget, 1921-1923, p. 96. 

Instructions for Preparation of Expenditure Estimates 

A brief set of instructions should accompany the esti- 
mate forms when sent out telling exactly how they should 
be prepared. These instructions should cover the fol- 
lowing points: 

1. Specify the final date for filing the estimates with 
the budget-making authority. 



fe 



CI 

iH 

I 
CO 

O 



T3 

9 

CO 
(M 

tH 

I 

<N 

a 






13 « 
?S g 

zn '& 

CO 

w 









ft 

3 -a » 



a 



Memoranda 
(Leave Blank) 

12 




.5 «'■£ 

HI 
■§•3 8 


1923- 
1924 

11 




1922- 
1923 

10 




S3 
o 

8 .S 

a) o 

p. 


1923- 
1924 

9 




1922- 
1923 

8 




Amount 

of and 

Date Option 

Expires 

7 




Present 
Assessed 

Value- 
Land and 
Buildings 

6 




Buildings 

on 

Tract and 

Estimated Value 

5 




No. of 

Acres 

Improved 

4 




No. of 

Acres 

or 

Dimensions 

of Lot 

S 




Name and 
Location 

2 




£ 
a 


6 





84 



THE ESTIMATE FORMS 85 

2. Specify the number of copies of the estimates to 
be filed. 

Some states and cities require only one copy to be filed ; 
others require several. For example, Virginia requires 
two copies to be filed; New York, six copies; and New 
Jersey, eleven copies. Three copies would seem adequate 
— two filed with the budget-making authority, and one 
retained by the agency making the estimates. 

3. Require the estimates, if possible, to be made out on 
a typewriter. Then the extra copies can be made as 
carbons. 

4. Require the estimates to be made in dollars only, 
omitting the cents. This saves paper, labor, and print- 
ing in getting out the budget ; and besides estimates car- 
ried below the dollar are of no practical value. 

5. Require the head or other responsible officer of the 
agency making the estimates to examine them carefully 
and to approve them by signing the recapitulation sheet, 
Form F. 

6. Explain the budget classification of expenditures as 
adopted for use in the preparation of the estimates. 
(This classification is set up on the caption of the model 
estimate forms. For explanation of this see the preced- 
ing chapter.) 

7. Explain in detail how to fill out each estimate form. 
Form A is used for all personal services, such as 

salaries, wages, and other compensations, or fees, com- 
missions, retainers, etc. It is preferable to group to- 
gether all employees in the same department or bureau 
having the same title and rate under one item number. 
Column 2 would then read, for example, i l Stenographers, 
3 @ $1,600 and $1,800"; this being the rate requested for 
each stenographer for each year of the coming biennium. 



•■a ^ § 

§ I i 

$ a < 



o 
w 

H 
H 



sg 






OHNM 



WeJ 






W »-liHi 

a «£ 



^s 



SiS 



&.J 

Sva 

• o g 

»3 S 

« £ 









#"gg 

+3 



oo 



a ft™ 

c3-£ I 

gp 






3 mm 

"HI* 

S s 2 
8*2 



03 oo 



86 



II 



SSfl" 3 £ ft 



•9 S 



If 
Sfta^a|ftc|l 

S 303'S a? a> o> 2 4> 



8 3 -IS 



S8 

el 
11 



8.2-2 
fe s fl 
£gg 

££0 



ilg 

■sal* 



-•J 

o 

>rs 00 ej E-l 

ScSS 
£OoQ 



• NCO-*»OCOl>.00 0>0 



87 



88 BUDGET MAKING 

In case the state or the city has a standardized civil 
service, the class and grade may also be indicated. 
Column 3 should be filled out whenever the compensation 
is fixed by constitution, statute, or ordinance. The name 
of the incumbent should be placed in column 10 only when 
it is a salaried position. Transportation, board, room, 
and so forth, furnished in addition to the regular salary 
should be indicated in columns 11 and 12. Columns 15, 
16, and 17 should be left blank. As many lines as neces- 
sary may be used to record a single item. If all items 
required cannot be put on a single sheet of any form, 
other sheets of that form may be used, totaling each 
sheet at the bottom and carrying the total forward to the 
top of the next sheet. Space is provided in the upper 
right-hand corner of each form for the sheet number. In 
filling out Form B, columns 5, 6, 7, 9, and 10 are to be 
left blank for such titles as rents, insurance, and interest. 
In making out Form F, columns 4, 6, 8, and 10 are to be 
filled out by institutions only. The per capita cost for 
each title is found by dividing the amount by the average 
number of inmates or students for the year. The average 
number of inmates per year can be ascertained by divid- 
ing the total number of inmate days by the number of 
days in a year. 

8. The instructions should contain a copy of the state 
budget law or the municipal budget ordinance. (This is 
for reference by the estimating agencies.) 

General Work Plan 

It is often desirable to have certain information about 
the general work plan or program of an organization 
unit in order to judge properly of the adequacy or inade- 
quacy of its expenditure estimates. The general work 



THE ESTIMATE FORMS 89 

plan shows that a department, board, commission, insti- 
tution, or agency spent a certain amount last year, is 
spending a certain amount this year, and proposes to 
spend a certain amount next year for overhead super- 
vision and for each of its principal activities. For ex- 
ample, a department of health may have, besides general 
overhead or executive supervision, the following main 
activities: prevention of communicable diseases; main- 
tenance of diagnostic laboratories; prevention of tuber- 
culosis ; promotion of sanitation ; hotel and lodging-house 
inspection; recording vital statistics; public-health in- 
struction; child hygiene and public-health nursing; and 
promotion of social hygiene. If the department is of suf- 
ficient size and properly organized, these activities would 
each constitute a bureau or division, in which case the 
estimate sheets, Forms A to F inclusive, would give the 
desired information. But if the department is not inter- 
nally organized so a,s to mirror its main activities, then 
the general work plan, Form G, should be filled out and 
submitted with the other estimate forms. The informa- 
tion contained on this form is of an administrative char- 
acter and is not to be used as a basis for making ap- 
propriations (see Chapter IX). Executive or adminis- 
trative allotments, however, may be made on this basis 
when the work plan is being carried out and the results 
shown by cost accounts. Form G- should total the same 
for each department, board, commission, institution, or 
agency as the ''grand total' ' of Form F. 

Other Expenditure Data 

In those states and cities where certain institutions 
carry on agricultural, animal, or shop industries, informa- 
tion should be furnished as to the output and cost of these 



o 

13 



3 

s 



1 

CO 

S3 






■a 

S 

I 



s 

o 



o 
S 
v> 

o 

g 

© 

1 


is 

S 6 




8 

l 

OS 
to 

1 

s 


a; 
o 
M 

1 

§ 


co 

1-1 




3 
© 

8 
| 


5 


« 

CO 
OS 

l 

OJ 






si 






J - 
S 1 




i 


J 

1 

"■si 

> c 

"e 

a 

C 

a 


'3 

p 

d 

o 

/■♦» 
.s 

1 

1 

p 





90 



THE ESTIMATE FORMS 91 

industries. This is needed especially when such indus- 
tries are supported by appropriations made for state use, 
as is the case in New Jersey. A statement of the output 
and cost of such industries should show under output: 
(1) value of products sold; (2) value of products used 
by institution (exclusive of industries) ; (3) value of 
products used by industry (producing goods) ; (4) value 
of products used by other industries; and (5) total value 
of products. Under cost it should show: (1) cash expen- 
ditures (by appropriate titles of the object-expenditure 
classification); (2) cost of products used; and (3) total 
cost. Then the excess of cost over production or vice 
versa should be shown. At least four years should be 
shown, actual figures for the preceding year, estimated 
for the current year and for each year of the coming bien- 
nium (if the budget covers a biennium). A supplemen- 
tary statement should show the value of the products 
used by the institution as chargeable to the appropriate 
titles of expenditures, namely, personal services, sup- 
plies and materials, etc. 

Often schools conduct boarding halls. These should 
also furnish certain information to show whether or not 
the boarding halls are self-supporting. They should 
make out a statement showing the total amount of income 
from boarding pupils, meals, etc. ; the total expenses clas- 
sified by personal services, supplies and materials, heat, 
light, power and water, equipment, etc. ; and the resulting 
surplus or deficit. 

State and municipal debt requirements should be cal- 
culated by the chief financial officer of the state or the 
city. The estimates of the amounts needed during the 
next budget period for sinking-fund installments and 
for the redemption of debts not provided for by sink- 



92 BUDGET MAKING 

ing funds should be furnished by this officer to the budget- 
making authority (see p. 125). 

Revenue Estimates 

Practically all of the state budget laws require the 
state auditor or the state comptroller to prepare and file 
estimates of revenues with the budget-making authority. 
The budget laws of New Jersey and of Kansas require 
the comptroller and treasurer jointly to furnish a state- 
ment of all estimated revenues to the governor, who is 
the budget-making authority. 

In those states and cities where all moneys collected 
by the various governmental agencies are paid into the 
treasury, the principal accounting officer can very well 
make up the estimates of revenues. These estimates 
should be properly classified (see preceding chapter for 
classification of revenues), and should show the amount 
actually collected during the preceding year, the amount 
estimated to be collected during the current year, and 
the amount anticipated for each year of the succeeding 
biennium (if the budget covers a biennium). 

While correct budget principles dictate that all moneys 
collected by governmental agencies should be turned into 
the treasury and all expenditures for these agencies 
should be accounted for through the treasury in pursu- 
ance to appropriations made by the legislative body, 
nevertheless, in a number of states and municipalities 
agencies are permitted to retain and to expend certain 
moneys that they have collected. In these cases 
complete estimates of such revenue should be fur- 
nished by the agency to the budget-making authority. 
These estimates should be classified by sources of revenue 
(see preceding chapter) and should indicate the general 



w 



s 

<» 
Co 

o 

8 

.0 

3 
00 

s 

S 

1 


a 
> 

« 

-d 
J 


OS 

7 




TO 
<N 
OS 

O 




a 
"S3 

u 
2 
Ph 


M 0) 






§5 




45 

| 

ft 

e 
e 




*o 

8 


t-< 

3 






93 



94 BUDGET MAKING 

purposes to which the revenue is to be applied. Form H 
is suggested for this purpose. 

Information from Government- Aided Agencies 

Several states, notably Maryland and Pennsylvania, 
appropriate public money to privately owned and con- 
ducted institutions and agencies, which are expected to 
render to the state in return therefor certain services. 
Money so appropriated is commonly known as " state 
aid." Some states have questioned the wisdom of mak- 
ing such appropriations and have enacted laws restrict- 
ing the use of public money for such purposes. In the 
event that a state or a city appropriates money for gov- 
ernment aid, it is good policy to keep such appropria- 
tions at a minimum. Experience has shown that the ten- 
dency is constantly to increase such expenditures at the 
expense of the regularly established activities of govern- 
ment. Maryland, for example, has recently been expend- 
ing for state-aid purposes almost one-fourth of the 
money available in the general fund. Government aid 
should be given only where an institution or agency is 
carrying on activities that are clearly government func- 
tions and that the government is not prepared at the 
time to undertake. And then the budget-making author- 
ity should require written information concerning the 
work of the institution or agency and should supplement 
this by a thorough investigation conducted by its staff 
agency or other disinterested and competent persons. 

While it may not be advisable in all cases for private 
institutions and agencies asking for government aid to 
furnish fully itemized expenditure estimates, they should 
at least furnish the information required on the recapitu- 
lation sheet, Form F, and the general work plan, Form 



THE ESTIMATE FORMS 95 

G. Special attention should be given, in the case of in- 
stitutions, to the per capita cost data required on Form 
F, since by such data the efficiency of operating the 
institution is shown. Per capita cost, when considered in 
connection with the quality of service rendered, which 
should be ascertained by personal inspection, may serve 
as a guide to the budget-making authority in recommend- 
ing appropriations. Such institutions and agencies 
should also furnish a revenue statement, using the rev- 
enue Form H explained in the preceding section. In the 
column captioned "sources of revenue' ' the following in- 
formation should be supplied: 

A. From sources other than the state (or city) : 

1. Endowments and investments 

2. Gifts for current expenses 

3. Charges for services 

4. Sale of goods 

5. Contributions 

6. Other sources 

Total 

B. From the state (or city) : 
1. Appropriation 

Grand Total 

There are also numerous questions of public policy, the 
answer to which depends to a large degree upon informa- 
tion concerning the activities of such institutions and 
agencies. Full information relative to all institutions 
and agencies performing state functions is necessary in 
order to formulate a definite and well planned public 
policy for carrying on charitable, health, educational, and 
other work. Questions of the advisability of construct- 
ing more hospitals and enlarging existing ones, of pro- 
viding more extensive state administered educational 
facilities, of the state assuming complete administrative 
control over the performance of such important func- 



96 BUDGET MAKING 

tions as the care of the insane and the feeble-minded, of 
the desirability of alloting the cost of charitable and cor- 
rectional functions between state and local governments, 
and numerous other questions of general policy cannot 
be determined wisely without detailed information and 
careful study of the activities of all these private in- 
stitutions and agencies. 



CHAPTER VI 

PREPARING THE ESTIMATES AND GATHERING 
OTHER BUDGET INFORMATION 

Methods of Securing Budget Information 

There are two general methods of securing budget in- 
formation. One method is by means of written estimates ; 
the other is by field investigations and records of a staff 
agency and by surveys conducted by other individuals 
and agencies. Practically all state and city budget laws 
require written estimates to be made in detail by the 
spending agencies to the budget-making authority. In 
most states and in a great many cities these estimates, 
when submitted, are accepted without field investigation 
on the part of the budget-making authority. In fact, in 
most cases, the budget-making authority has no staff 
agency for this purpose. A few states, like Hlinois and 
Wisconsin, have staff agencies that investigate all esti- 
mates and keep currently certain records of all expendi- 
tures (see Chapter II). In the preparation of the first 
Virginia budget (1919) a number of special investiga- 
tions, relating to the various financial problems of the 
state, were conducted by special committees appointed by 
the governor and by research agencies from without the 
state. 

While written estimates are necessary and cannot be 
dispensed with in gathering budget information, they 
should always be supplemented by investigations con- 
ducted by a competent staff agency. The very fact that 

97 



98 BUDGET MAKING 

such investigations are made insures that greater care 
will be exercised by the spending agencies in preparing 
their estimates. 

Sending Out the Estimate Forms 

Practically all of the states and cities leave the prepara- 
tion of the estimate forms to the budget-making authority 
or its staff. In Ohio, Illinois, and Nebraska the forms are 
prepared by the departments of finance, which act as 
staff agencies to the governor in the preparation of the 
budget. In Massachusetts they are prepared by the su- 
pervisor of administration, and in Idaho by the budget 
bureau under the governor's office. 

Several state budget laws, notably those of Idaho, Illi- 
nois, Nebraska, and Wisconsin, specify a date for sending 
out the estimate forms. This date varies from one to two 
months before the date fixed for the filing of the esti- 
mates. 

In Wisconsin the staff of the state board of public af- 
fairs inserts on the estimate forms, before sending them 
out to each agency, the actual and itemized expenditures 
of the agency for each of the three years preceding the 
year then current, as shown by the controlling accounts 
kept in the office of the board. Thus, the arrangement of 
the information and the degree of itemization are deter- 
mined by the staff before the estimates leave the board's 
office, a certain amount of space being left for the inser- 
tion of new items by the spending agency. Upon receipt 
of these forms, each spending agency is required to in- 
sert the estimated allotment of appropriations for the 
current year and its requests for each year of the suc- 
ceeding biennium. 



PREPARING THE ESTIMATES 99 

Responsibility for Preparation of the Estimates 

In order to fix responsibility for the preparation of the 
estimates a number of the state budget laws require the 
estimates to be certified to by the head, or other respon- 
sible officer, of the spending agency submitting them. 
The Maryland and West Virginia budget amendments re- 
quire the estimates of the legislature to be certified to by 
the presiding officer of each house, and those of the judi- 
ciary by the comptroller or auditor. Kentucky, New Jer- 
sey, and Kansas go so far as to require all estimates to 
be sworn to by a responsible officer of the spending agency 
before submission to the budget-making authority. 

The main purpose of these requirements is to fix re- 
sponsibility for the estimates upon some one person 
either directly connected with the administration of the 
spending agency or controlling its expenditures. In a de- 
partment or institution the one person who is in a posi- 
tion to view the work of the agency as a whole and who 
should assume, therefore, such responsibility is undoubt- 
edly the head of the organization. This does not mean, 
however, that all the detailed work of preparing the esti- 
mates must necessarily be done under his immediate su- 
pervision. Each bureau or division should prepare its 
estimates, which should go with the approval of the bu- 
reau or division chief to the head of the department or in- 
stitution. The departmental or institutional head should 
then examine all estimates carefully and should make 
such adjustments in the requests of the several divisions 
or bureaus as he may think proper in order to set forth a 
well rounded expenditure program for the department or 
institution. As evidence that this examination has been 
performed, he should be required to attach his signature 



100 BUDGET MAKING 

of approval to the estimates before submitting them to 
the budget-making authority (see estimate forms, preced- 
ing chapter) . 

Relation of the Fiscal Period to the Preparation of the 
Estimates 

The relation of the date of preparing the estimates to 
the beginning of the fiscal period is very important. All 
estimates are only guesses applicable to a future period 
that are based upon past and present financial experience. 
Hence the nearer the spending officer is to the beginning 
of the future period, the more accurately he can guess. 
Since most of the state legislatures meet early in the year, 
usually in January, the estimates must be prepared dur- 
ing the latter part of the preceding year so that the bud- 
get may be ready for presentation to the legislature early 
in the session. For this reason, the date of preparing the 
estimates has been adjusted to the meeting of the legis- 
lature, and the period to which the estimates are appli- 
cable has so far received very little attention. In Mas- 
sachusetts the date of the beginning of the fiscal year 
was purposely moved backward several months to De- 
cember 1 in order that the legislature might have the 
actual expenditures of a year just closed when it met in 
January. 

Most of the states that have recently changed their fis- 
cal years have made them conform with that of the federal 
Government, namely July 1 to June 30. The fiscal years 
of a number of states begin in October or November fol- 
lowing the meeting of the legislature, which puts the date 
of the preparation of the estimates 10 or 11 months ahead 
of the period to which the estimates apply. And, in the 
case of those states whose legislatures meet biennially, 



PREPARING THE ESTIMATES 101 

the estimates for the second year of the biennium are 
prepared 22 or 23 months before the year begins. In 
other words, the spending agencies are asked to estimate 
their expenditures practically a year or two years before 
they begin to expend them. The fiscal years of all states 
should begin either on July 1 or on April 1 following the 
meeting of the legislature, July 1 being preferable so as 
to conform with the fiscal year of the federal Govern- 
ment. The legislature should then meet in February or 
March. Then the estimates can be prepared within five 
to eight months of the beginning of the fiscal period to 
which they apply. 

In case of " federal aid" to state governments there 
is a decided advantage in having the fiscal year of the 
states conform to that of the national Government. Uni- 
formity in the fiscal years of the states makes more com- 
parable the financial statistics of the states. If the fiscal 
year begins July 1, the working year of educational and 
similar institutions is not broken up. With the fiscal year 
beginning shortly after the legislature adjourns it is not 
necessary to have " votes on account' ' for carrying on the 
work of the government until the budget can be acted 
upon by the legislature and the appropriations made. 

In cities the fiscal year is most commonly the same as 
the calendar year. A fiscal year beginning either Janu- 
ary 1 or July 1 is satisfactory for budget-making pur- 
poses, in the case of cities, since their legislative bodies 
meet frequently throughout the year. 

Filing of Estimates 

In both cities and states the estimates are commonly 
filed directly with the budget-making authority or its 
staff agency. Some exceptions may be noted in the states. 



102 BUDGET MAKING 

In Arkansas and North Dakota the estimates are filed 
with the state auditor, who transmits them to the budget- 
making authority. In New Hampshire they are filed with 
the state treasurer. In New York copies of the estimates 
are filed with the comptroller and the governor, as well 
as with the joint budget committee of the legislature. 
The auditor of Massachusetts receives copies of the es- 
timates, which go to the supervisor of administration's 
office. 

Field Investigations 

Information gathered from field investigations should 
supplement all data contained in the written estimates 
submitted by the spending agencies. It is essential that 
either the trained staff of a central budget agency or dis- 
interested specialists shall examine carefully the needs, 
especially those calling for repairs, new buildings, and 
the acquisition of property of each spending agency and 
report their findings to the budget-making authority. In 
this way the budget-making authority is furnished with a 
much broader basis for judgment in passing upon the 
requests; it has both the estimates of the agency asking 
for appropriations and the estimates of an independent 
agency or of disinterested specialists. 

General Investigation of Estimates 

The general advantages of having a permanent staff 
agency to assist the budget-making authority in the gath- 
ering of data and in the preparation of the budget have 
already been pointed out in Chapter II. The Illinois de- 
partment of finance, which is the budget staff agency of 
the governor, gathers information continuously for use 
in the preparation of the budget. Part of this informa- 



PREPARING THE ESTIMATES 103 

tion is furnished by the controlling accounts kept in the 
department. Preceding the preparation of the budget, 
the superintendent of budget visits all the institutions 
and studies their needs and the per capita cost of their 
operation and maintenance. The staff of the Wisconsin 
board of public affairs makes field examinations after 
the estimates are received, a member of the staff visiting 
each department and institution. The information thus 
obtained is recorded for use by the board in making its 
budget recommendations and for presentation to the leg- 
islature in support of its recommendations. The budget 
staff agencies of other states and a few cities conduct 
somewhat similar examinations of the needs of the state 
departments and institutions. 

'Investigation of Particular Problems and Functions 

Surveys should be made to show the physical condition 
of the various buildings and plant structures belonging to 
the state or municipality. In many states and cities ap- 
propriations for repair purposes are made in a haphazard 
manner without adequate information being furnished as 
a basis. As a result some buildings are frequently 
neglected. 

In preparing the 1919 budget the Illinois department of 
finance conducted a careful survey of the state's proper- 
ties and developed a figure based upon annual percentage 
of depreciation. This figure was fixed at 2 per cent for 
stone and brick buildings and a larger percentage for 
machinery and power plants. For this work the depart- 
ment of finance secured specialists from the other code 
departments. The architect of the department of public 
works and buildings supervised the examination of all 
buildings and made written reports to the department of 



104 BUDGET MAKING 

finance concerning the nature and cost of all needed re- 
pairs. Likewise, the supervising engineer examined the 
machinery and estimated the cost of needed repairs and 
replacements. 

The question of plant extension, or the development of 
a building program, is very important in budget making. 
Otherwise, millions of dollars may be expended in build- 
ing and equipping a plant in a very unsuitable location, 
or in extending a plant in such a way as to hamper seri- 
ously its future development and operation. The institu- 
tions that the state or the city builds for educational, 
charitable, correctional, and penal purposes should be as 
advantageously located as possible, and the lay-out and 
development of the plant should be carefully planned. 
Hence it is necessary to develop a program extending 
over a number of years. For this purpose a comprehen- 
sive survey for determining the building needs of the 
state or the city for future years should be made in con- 
nection with the budget work. 

Then the principal fields of state and municipal work, 
such as public health, need to be carefully surveyed by 
specialists who are not interested directly in the appro- 
priations to be granted to the work. Sometimes organ- 
izations within the state can furnish such specialists, or 
they can be secured from research organizations from 
without the state. These specialists should work under 
the direction of the budget-making authority and its staff 
agency. The nearest approach to this kind of survey 
work has been attempted in Virginia. During the prep- 
aration of the first budget (1919) a large number of sur- 
veys were made of the various governmental agencies. 
These surveys were conducted by special survey boards 
appointed by the governor and by research agencies em- 



PREPARING THE ESTIMATES 105 

ployed from without the state, the governor's secretary- 
directing the work. 

Financial and Economic Survey of the Government 

A survey of the wealth, industries, resources, and tax- 
able properties of the state or the city is needed as a 
basis for measuring the cost of government over long pe- 
riods and as a guide in deciding on questions of policy. 
For example, a state may be spending a certain amount 
for a particular work and there may be good reasons 
why the work is of itself worthy of support, but when it 
is found that the state is thereby encouraging an indus- 
try that is on a steady decline because the resources on 
which it relies are being rapidly exhausted, then the whole 
matter is to be viewed in a different light. Where the 
state comes into vital relations with private economy, the 
status of that economy should be studied, and should be 
taken into account in the budget, which is to serve as a 
foundation for financial and administrative action. A 
revenue survey should include not merely an account of 
receipts, but of taxable resources as well. In other words, 
the economic and commercial conditions and relations of 
the government should be given a regular place in the 
budget. 

Virginia was the first state to attempt such a survey. 
Its budget law requires "a general survey of the state's 
financial and natural resources, with a review of the gen- 
eral economic, industrial, and commercial condition of 
the commonwealth. ' ' In this survey the following sub- 
jects, which the governor speaks of in his analysis * or 
"budget message," were taken into account: national 
bank resources, agricultural development, mineral re- 

i Virginia State Budget, 1920-1922, p. xii. 



106 BUDGET MAKING 

sources, coal production, forest resources, development 
of water power, trade and commerce, and fisheries. 

Other states, notably Wyoming, 2 have since given some 
consideration in budget making to a general survey of the 
economic condition of the state. 

2 Wyoming State Budget, 1921-1923, p. x. 



CHAPTER VII 

REVIEWING AND REVISING THE ESTIMATES 

Why Estimates Should Be Reviewed and Revised 

Expenditure estimates are usually prepared by or un- 
der the supervision of bureau or division chiefs, who see 
mainly the work of their particular bureau or division 
and who do not have to consider how the money is to be 
raised to meet the expenditures. Such spending officers 
are apt to exaggerate their needs because of interest in 
their own work and because of lack of perspective and ap- 
preciation of larger issues. For this reason there is not 
only need for review and revision of bureau or division 
estimates by department heads, but there is also need for 
review and revision of department estimates by some 
general authority, who views the expenditures of the gov- 
ernment as a whole. The estimates, as they are prepared, 
are the independent expressions of the needs of the vari- 
ous units of government; they ought to be brought to- 
gether, compared, balanced the one against the other, and 
revised in accordance with their relative importance and 
in the light of available revenues and social needs. This 
must be done before they mean anything. A mere com- 
pilation of estimates set up by departmental clerks or by 
detached financial officers cannot serve the purposes of 
the budget. Experience in several states, notably New 
York, has shown that such compilations, no matter how 
well prepared by the comptroller or other officers, have 
been practically useless as guides in shaping legislative 
opinion. As a matter of fact the estimates so set up are 

107 



108 BUDGET MAKING 

usually padded by the officers preparing them and there- 
fore form no solid basis for legislative judgment. And 
they generally exceed by far the anticipated income of 
the government. This means that review and revision of 
the estimates by a responsible central authority is neces- 
sary ; in fact, it is the only procedure by which a compre- 
hensive budget plan may be developed. 

Review and Revision a Function of the Budget-Making 
Authority 

The person or persons responsible for submitting the 
budget to the legislature, that is, the budget-making au- 
thority, should review and revise the estimates. This 
does not mean, however, that the budget-making author- 
ity should do all the detailed work incident to review and 
revision, but that it should be sufficiently acquainted with 
the estimates to make recommendations in line with a 
general policy or in conformity with public opinion. The 
staff agency to the budget-making authority should do 
the preliminary sifting of the estimates, establish stand- 
ards as far as possible, investigate the conditions of 
spending agencies, and judge existing services. The staff 
should furnish the expert or technical information and 
opinion with reference to the activities and needs of the 
government and the budget-making authority should 
make decisions after having balanced each service against 
every other, against public needs, and against the finan- 
cial resources of the government. 

Not only should the budget-making authority, by a 
thorough review of the expenditure estimates, propose 
an expenditure program to the legislative body, but it 
should, at the same time, propose a revenue program that 
is commensurate with the expenditure program. The 



REVIEWING THE ESTIMATES 109 

revenue estimates furnished by the chief financial officer 
of the government should be carefully reviewed by the 
budget-making authority. If the existing revenue laws 
are not likely to produce enough money to meet the pro- 
posed expenditure program, the budget-making authority 
should call upon the finance department or the chief finan- 
cial officer for suggestions. In recommending new taxes, 
the budget-making authority should consider not only the 
revenue-producing power of such taxes, but also their 
effects upon the public economy. 

Legal Provisions for Review and Revision 

Practically all of the state budget laws require the bud- 
get-making authority to review the estimates, but less 
than half of these laws expressly confer upon this author- 
ity the power to revise the estimates in the preparation 
of the budget. In most cases certain estimates are spe- 
cifically excluded from the exercise of the power of revi- 
sion on the part of the budget-making authority. Only 
in Massachusetts, Mississippi, New York, Tennessee, and 
Vermont is the budget-making authority given the power 
to revise all estimates. In Colorado, New Mexico, Okla- 
homa, South Carolina, and Virginia the budget-making 
authority may revise all estimates except those of the 
legislature and the judiciary ; in Maryland and West Vir- 
ginia it may revise all estimates except those of the legis- 
lature, the judiciary, and the public schools; in Minne- 
sota it may revise all except the estimates of the legisla- 
ture, the judiciary, the state university, and the state 
militia ; in Nevada and Utah all except estimates relating 
to the legislature, public debt obligations, and fixed sal- 
aries; and in Wyoming all except the legislative esti- 
mates. In Illinois and Nebraska the head of the finance 



110 BUDGET MAKING 

department is given the power to approve, disapprove, or 
alter the estimates of the code departments before sub- 
mitting them to the governor for executive consideration 
and recommendations. 

In most cities the budget-making authority has the 
power to revise practically all the estimates. There are, 
however, certain financial obligations of the city, such as 
debt payments and some fixed charges, that the budget- 
making authority cannot change, at least, to any extent. 

Cabinet Councils and Conferences of Administrative 
Officers 

Cabinet councils and conferences of administrative of- 
ficers are necessary to sound financial planning. After 
the estimates have been brought together, the heads of 
departments and important agencies should be called to- 
gether by the budget-making authority and should dis- 
cuss in a matter-of-fact way the merits of their respective 
demands upon the treasury. This is made possible 
by a reorganization of the administration into a few de- 
partments, the heads of which are directly responsible to 
the chief executive, such as has taken place in Illinois, 
Idaho, Nebraska, Ohio, and Washington and in a num- 
ber of cities. As a matter of actual practice in Illinois, 
the director of finance and the superintendent of budget 
examine the estimates and then call into conference the 
department heads and division chiefs of the code depart- 
ments as well as the independent state officers. At these 
conferences the estimates are reviewed carefully and 
later revised by the director of finance. The revised esti- 
mates are then submitted to the governor, who reviews 
them carefully, calling his cabinet into council, and mak- 
ing whatever changes he deems necessary. 



REVIEWING THE ESTIMATES 111 

In those states, like Wisconsin, where the government 
has been organized under a number of boards and com- 
missions, each so constituted as to be beyond direct exec- 
utive control, the budget-making authority is usually a 
board composed of representatives of the most important 
of these boards and commissions. Oftentimes represen- 
tatives of the legislature are included. Such a board is 
an attempt to bring together as a council the heads or re- 
sponsible officers of the most important spending agencies 
of the state. It may work very effectively in the review 
and revision of the estimates, but it lacks leadership. 
There is no one person responsible for final decisions in 
cases of conflicts of judgment or opinion; all conflicts 
must be settled by compromises in which the best inter- 
ests of the state as a whole may be disregarded. The 
governor, while representing politically the people of the 
entire state, has no more power and authority than does 
any one of a number of powerful administrative officers 
who are neither responsible to the people nor under the 
control of the governor. The same things are generally 
true in cities where commissions and boards of estimate 
have been constituted as budget-making authorities. 

Most of the states still have a non-integrated, ram- 
shackle form of government that has grown up mainly as 
a result of haphazard legislation by which new agencies 
have been created, year after year, with little regard for 
previously existing agencies, either as to the form of their 
organization or the scope of their powers. The officers 
of some of these agencies are responsible to the governor, 
others are elected by the people, and still others are re- 
sponsible to managing boards or to the legislature. For 
this reason some states have constituted as the budget- 
making authority a board in which these various inde- 



112 BUDGET MAKING 

pendent elements of government find representation. 
Other states have tried to carry out the idea of making 
the governor the budget-making authority, but without 
a reorganization of their governments so as to center the 
lines of administrative responsibility in the governor. 
Pretty soon the governor, who has been placed in such a 
position, finds if his recommendations are to have weight 
with the legislature and if the legislature is to be re- 
strained from giving ear to later demands of the dif- 
ferent independent officers and agents that he must per- 
mit these various elements to take part in the determina- 
tion of the budget recommendations. So the governor 
calls in representatives of the legislature and the more 
important administrative agencies to assist him in the re- 
view and revision of the estimates. Such has been the 
case in New Jersey and Virginia. In these cases the exec- 
utive type reverts to the board type of budget. This can 
scarcely be avoided so long as a decentralized administra- 
tive organization is allowed to remain. The lines of re- 
sponsibility for the different stages of budgetary proce- 
dure cannot be clearly drawn under such an organization 
(see Chapter XII). 

Tentative Budget Proposals 

After conferences with the chief administrative officers, 
the budget-making authority should prepare, with the 
assistance of its staff, a tentative budget. Such a budget 
is necessary if public hearings are to be held. It has been 
the practice in several states to hold hearings on the 
original estimates, sometimes even before the estimates 
have been reviewed by the budget-making authority. In 
such instances hearings amount to little more than giving 
the spending agency an opportunity to make out a case 



REVIEWING THE ESTIMATES 113 

in support of its requests. The revenue side of the budget 
and the demands which it makes of the taxpayer are 
usually slighted. 

After the spending agencies have presented their ex- 
penditure estimates and the chief financial officer has 
submitted the revenue estimates, then the budget-making 
authority should prepare a tentative budget, covering 
both the expenditures and the means of financing them. 
This tentative budget should be made available to the 
public a sufficient length of time before the hearings to 
permit of examination. Unless there is a comprehensive 
program presented in this way, no matter how tentative 
it may be, the public hearings will be without the proper 
and necessary basis for discussion. This tentative budget 
should not attempt to go into great detail, but should at 
least show the total amount requested by each organiza- 
tion unit and the total amount it is proposed to allow the 
same unit, indicating how much of this total it is proposed 
to expend for current expenses and fixed charges and how 
much for the acquisition of property. It might go to the 
extent of indicating how much it is proposed to expend 
for the various classes, as personal services, supplies 
and materials, and so forth. The total amount requested 
by all units of government and the total amount it is pro- 
posed to allow them should be shown, and this latter 
amount should be compared with the total anticipated in- 
come of the government. If the amount it is proposed to 
expend is greater than the total anticipated income, then 
the tentative budget should propose new sources of rev- 
enue. It is as important that proposed sources of rev- 
enue should be discussed at the public hearings as it is 
that proposed increases of expenditure be discussed. Al- 
ways the two sides of the budget, the expenditure side 



114 BUDGET MAKING 

and the means-of-financing side, should be kept clearly 
in mind. 

Public Hearings 

The budget laws of seven states 1 provide that the bud- 
get-making authority shall hold public hearings on the 
estimates in the preparation of the budget. The budget 
laws of 12 other states 2 provide that the budget-making 
authority, at its discretion, or upon request, may hold 
hearings on the estimates. The budget provisions of most 
of the larger cities require the budget-making authority 
to hold public hearings at some time during the prepara- 
tion of the budget. 

The main purpose of such provisions is undoubtedly to 
give publicity to the budget proposals in advance of the 
legislative session by permitting officers and citizens to 
register objections to the program of the budget-making 
authority. If the governor is the budget-making author- 
ity under an administrative organization that centers re- 
sponsibility in him and if he or his representatives may 
appear before the legislature in open session to explain 
and defend the budget, then a provision for public hear- 
ings at this stage is largely gratuitous. Certainly the 
governor, for his own protection, would seek all of the 
advice obtainable before submitting his budget plan, and 
the public would be fully informed by the open procedure 
in the legislature for inquiry, review, and criticism of the 
budget plan. But until the legislatures adopt a proce- 
dure with respect to budgets that will fully inform the 
public on budget issues, public hearings conducted by the 

i Idaho, Maine, Oklahoma, South Carolina, Tennessee, Virginia, and 
Wyoming. 

2 Colorado, Connecticut, Kansas, Maryland, New Jersey, New Mexico, 
Nevada, North Dakota, South Dakota, Utah, Vermont, and West Virginia. 



EEVIEWING THE ESTIMATES 115 

budget-making authority upon a tentative budget plan 
should be held. 

The assistance of the press should be secured in mak- 
ing public the tentative budget plan, and the date and 
place of the hearings. Press reporters should be present 
at the hearings and report the salient facts brought out. 
In addition, representatives of spending agencies, tax- 
payers, or their representatives, should be encouraged to 
be present and should be given an opportunity to be 
heard. A record of the important facts brought out at 
these hearings should be made for the subsequent use of 
the budget-making authority in the final revision of the 
tentative budget and for the information of the legis- 
lative body. This method of procedure is particularly 
applicable to municipal budget making. 

Final Revision 

In the light of the information gleaned from the hear- 
ings and from other sources, the budget-making author- 
ity, with the assistance of its staff, should make a final 
revision of the tentative budget plan. This final budget 
plan, together with collateral information, should then 
be set up in proper form for presentation to the legisla- 
tive body. The form and contents of the budget will be 
taken up in the next chapter. 



CHAPTER VIII 
THE FORM AND CONTENTS OF THE BUDGET 

The prime purpose of the budget, as has been pointed 
out, is to present a financial plan upon the basis of which 
the work of the government is to be conducted. The bud- 
get-making authority, whose duty it is to prepare the 
plan, should present it in a very simple and summary 
form, so that the legislative body and the people can view 
it at first in its broad outlines and then go into the de- 
tails of the plan. The plan must be so set up that it may 
be understood easily by all persons whether they are fa- 
miliar or not with the methods and technique of account-^ 
ing. This can be done; in fact, every essential of the 
budget plan can be shown in one statement upon a single 
page. 

The budget, then, as a document or set of documents, 
should show: (1) the budget plan as a whole, that is, a 
single statement, setting forth the complete plan, which 
is fully explained by supporting schedules and a "budget 
message ;" and (2) supporting information, consisting 
of the detailed estimates and statements relating to the 
financial condition and operations of the government. 
The appropriation, revenue, and borrowing measures de- 
signed to carry the proposed budget plan into operation 
will be taken up in the next chapter. 

I. The Budget Plan 

It is proposed to present the complete budget plan in 
the form of a "consolidated budget statement," sup- 

116 



SI 








CO 




ca 




T 1 




til 








co r* 




CO <M 


W 




1 


H 


*i> c* 


c/) 


^ 




H 


,A 


W 


ON 


O 


MH C3> 


Q 


5P 




d o> 


Q 


w 


^73 


5 


o 

MH CO 

O sn 


1 

o 


P=4 

CO ** 


CO 

o 


•a £ 



c3-d 
ro co 

co cs 

■go 

CO 



W 



CO 



OJ 
bfl 
T3 

n 
>> 

.0 

T) 

a) 

> 
o 
O 

a 

"3 
a 

m 


<N § 

2e 
col 

IN w 

2^ 






















8? 
2^ 




a 

g 

'3 

a) 

« 

-p 

a 
© 

o 


<N § 

2&q 




OS Q 




/ 






bfi 
GO 


CO OJ 
<N -* (ON Hi 00 






a 

a 
b 
t- 

R 

c 

4 

X 

p 
a 

t/ 

p 

a 

g fL 

2 "p 


> 

1 
l 

j 

± 
■I 

I 

< 


xt 

P 
1 

b 

c 
15 

c 
a 

> 

i< ^ >- 
^J 
p^ 

««^ 

o a 

11 

-P (- 


1 
j 

T 
P 

P 

J 

P 


5 
1 

P 
c < 

1 


Means of Financing: 

Surplus at Beginning of Fiscal Year 


] 


t 

fe 

•< 

Sz 

£ 

ft 

c 

a: 

< 

o i 


ft 
< 

< 

S 

[ 

E 

a 





117 



118 BUDGET MAKING 

ported by a number of summary schedules and explained 
by the "budget message.' ' There follows a discussion 
of these statements and exhibits of the forms to be used 
in presenting them. 

Consolidated Budget Statement 

The consolidated budget statement is designed to pre- 
sent upon a single page the complete financial plan of the 
government for each year of the coming biennium, com- 
paring these years with the current and preceding years. 1 
The budget plan naturally divides itself into two parts : 
(1) expenditures and (2) means of financing expenditures. 
For the purposes of this statement, expenditures may be 
divided into: (1) current expenses and fixed charges, (2) 
acquisition of property, and (3) redemption of debt. 
These divisions are based upon the classification of ex- 
penditures 'by character, as set forth in Chapter IV. The 
first division includes those expenditures that must be 
made currently to run the government, that is, expendi- 
tures for administration, operation, and maintenance, 
and for other charges that must be met annually. The 
second division includes expenditures for property, such 
as equipment, buildings, and land, from which benefits 
accrue to the future. The third division includes the ex- 
penditures for the redemption of debt, either by direct 
appropriations or by sinking-fund installments. When 
a state or a city incurs temporary debts because of tax 
deficiencies or on account of emergencies, these may be 
shown as a fourth division under the heading either of 
* ' temporary loans to be met " or of ' ' deficit. ' ' Since tem- 

i Since the majority of state legislatures meets biennially, the forms 
have bean devised for a budget covering two years. When the budget is 
prepared annually, as in the case of cities and some states, one column is 
to be dropped. 



SCHEDULE 1 



Summary of Expenditures and Means of Financing for the Fiscal Years 1922-1923 and 1923-1924 Compared with the Fiscal Years 1920-1921 

and 1921-1922, Classified by Funds 






Supporting 
Schedule 
Number 


Expenditures 


Means of Financing 


Fund» 


Totals 


Current Expenses 
and Fixed Charges 


Acquisition of Property 


Redemption of Debt 


Totals 


Revenues 


Borrowings 


Surplus 




1020- 
1021 


1921- 
1922 


1922- 
1923 


1923- 
1924 


1920- 
1921 


1921- 
1922 


1922- 
1923 


1923- 
1924 


1020- 
1021 


1921- 
1922 


1922- 
1023 


1923- 
1924 


1920- 
1921 


1921- 
1922 


1922- 
1923 


1923- 
1024 


1020- 
1021 


1021- 
1022 


1022- 
1023 


1923- 
1924 


1920- 
1921 


1921- 
1922 


1922- 
1923 


1923- 
1024 


1020- 1021 
1021 1922 


1022 
1923 


1023 
1921 


1020 1921 
1921 1922 


1022 
1023 


1923 






































































































General Fund 


2, 3, I, 5 


































































Special Expendable Funds 


2, 3, 4, r, 


































































(List each) 




































































Total 




































































HinkiiiK FuikIh 

(See Schedule 7 for itemized 

list) 


5, 7 


































































Working Capital Funds 


2, 5 


































































(List eaoh) 




































































Total 






































































2, 4, 5 


































































(List 'hi 




































































Total. ... 




m 




































































Ornnd Total 












. 














































1 










N__ 





SCHEDULE 2 

Summary of Expenditures for Current Expenses and Fixed Charges from Various Funds for the Fiscal Years 1922-1923 and 1923-1924 Compared with 

the Fiscal Years 1920-1921 and 1921-1922, Showing Organization Units 



III. Executive Office: 



lEIMHT.UENTS (AND INSTITUTIONS): 

1. Department of State 

2. Department of Finance 

3. Department of Agriculture. . . 

4. Department of Public Works, 
etc 



VI. State Aided Agencies: 

Private hospitals (name carlo 
Private schools (name each) . . 



VIII. Miscellaneous: 

(Specify) 



Current Expenses. 



Fixed Charges : 

1. Interest (see Schedule 6) . . 

2. Pensions and Retirements 

3. Grants and Subsidies 



Total Fixed Chart 



Special Expendible Funds 



Working Capital Funds 



Endowment Funds 



FORM AND CONTENTS OF BUDGET 119 

porary loans are currently met out of revenues, they may 
be shown as a deficit under expenditures when they ex- 
ceed the surplus from' revenues. Extraordinary and 
large expenditures that do not recur, as, for example, a 
bonus from the state to all its soldiers and sailors in rec- 
ognition of their war services, should be shown as a fifth 
division, since to put such expenditures under current 
expenses and fixed charges, even if they might be re- 
garded as belonging there, is to exaggerate that division 
of expenditures for a particular year so much as to make 
comparisons with other years practically worthless. 

It is sufficient for this consolidated budget statement to 
show the means of financing expenditures under the fol- 
lowing heads: (1) surplus, (2) revenues, and (3) borrow- 
ings. In other words, the surplus at the beginning of the 
period (if there be any) plus the revenues to be accrued 
during the period plus the money that is to be raised dur- 
ing the period by borrowing gives the total means of 
financing. If money is raised by the state or the munic- 
ipality for public improvements by means of special as- 
sessments, this may also be shown as a heading under the 
means of financing expenditures. 

It will be seen from an examination of this consolidated 
budget statement that every figure it contains is sup- 
ported by summary schedules that go back to the detailed 
estimates and other data as a basis. In some cases the 
schedules support each other, as will be noted later. A 
score or more of these schedules might be set up, but it 
seems best to reduce the number to a minimum and to 
indicate clearly just what each schedule presents and 
how it supplements the general plan as set forth by the 
consolidated budget statement, otherwise there is danger 
of confusing rather than of clarifying the financial data. 



120 BUDGET MAKING 

The need for such a statement, as the consolidated bud- 
get statement described above, has not been fully appre- 
ciated by many state and city budget-making authorities. 
Some have not tried to ^produce such a statement ; others 
have found it too difficult because of numerous funds and 
on account of obsolete accounting and reporting methods. 
The budget laws of a few states indicate that such a state- 
ment of the budget plan, showing the entire expenditures 
and the means of financing them, is to be set up ; and all 
state budget laws will permit the setting up of such a 
statement. In a number of cities it is rather difficult un- 
der present laws to make the budget present a complete 
picture of municipal income and expenditures because of 
the independent character of sonie of the agencies mak- 
ing expenditures, for example, city school boards. But 
so far as possible these agencies should be brought into 
the municipal budget. The budgets of Maryland and 
Massachusetts, as presented to the 1920 legislatures, may 
be pointed to as containing among the best exhibits of a 
summary statement of the entire budget plan thus far 
presented in state budget documents. 2 

Schedule 1: Expenditures and Means of Financing 
Shown by Funds 

Schedule 1 supports the several items and totals of the 
consolidated budget statement by breaking them up be- 
tween the various funds of the government on the basis 
of the classification by funds as set up in Chapter IV. 
This statement is required, since it is necessary to know 
the fund restrictions that have been placed upon the in- 



2 See Maryland budget, presented to the legislature January, 1920, pp. 
17 and 18; also Massachusetts budget, presented to the legislature January 
16, 1920 (House Document, No. 1000), pp. 32 and 33. 



SCHEDULE 3 
Summary of Expenditures for Current Expenses for the Fiscal Years 1922-1923 and 1923-1924 Compared with the Fiscal Years 1920-1921 find 1921-1922, Classified by Objects for Each Organization Unit 



" D,M,l »»»»™ Um» Instit, ,„ 

' ['''I'-" NINTH „( Slul, 

:. "»'l "1 u( Ki, ,. 

, 'LTIM,,,,! „| \,.„ 



fejukwiloli 



applies and Materials 



Taxes: Property. . . 

Poll 

Income. . . . 
Corporation 
Inheritance. 
Etc 



2. Licenses 

3. Franchises 

4. Privileges and Permits 

5. Fees 

6. Rents 



I Proposed Changes (Indicai 
Increase or Decrease in 
Rate, or New Proposals) 



SCHEDULE 5 
Summary of Revenues for the Fiscal Years 1922 19?!3 and 1923-1924 Compared with the Fiscal Years 1920-1921 and 1921-1922, Classified by Sources and Arranged by Funds 



9. Fines and Forfeits. . 

10. Grants and Donations. . 

11. Escheats (in case of state 

Total 



General Fund 



Special Expendable Funds 



(Name Fund) 



1920- 

Kr-M 



I 



Endowment Funds 



FORM AND CONTENTS OF BUDGET 121 

come and upon the expenditures of the government before 
the budget-making authority can finally formulate plans 
for increased services or for new undertakings and be- 
fore the legislative body can judge of the merits or de- 
merits of the proposed plans. In several of the states, 
California for example, about one-half of the state's in- 
come goes into special funds, hence an analysis by funds 
of expenditures and means of financing expenditures be- 
comes highly important if the budget is to present a com- 
plete plan. Where a government has numerous special 
funds, as some states and cities have, this schedule will 
necessarily be rather lengthy but this cannot be avoided, 
since it is quite necessary to set up this information for 
budget-making purposes. The only way to avoid a long 
schedule is to reduce the number of funds. This should 
and can be done. Massachusetts may be cited as an ex- 
ample of a state that places practically all its receipts 
from revenue in a single fund — the general fund. 

Schedule 2: Expenditures for Current Expenses and 
Fixed Charges Shown by Funds and Organization 
Units 

Schedule 2 supports " current expenses and fixed 
charges" on the consolidated budget statement, also the 
column bearing the same title on Schedule 1. It sepa- 
rates fixed charges from current expenses and shows the 
organization units responsible for expenditures under the 
latter. " Fixed charges," as set up on this schedule, cov- 
ers only charges against the government as a whole. For 
example, " interest,' '■ as it is shown, would, comprehend 
only interest on long-term and temporary loans of the 
government. In case certain organization units should 
have interest charges, then they should be shown as a 







^ 
























s ,„ 




os2 


















2g 








































CI 


ft 
















1 


rH 


Jh<* 






v 












CO - 


J 


*s 


















cm w 




















s$ 




S® 


















•2 P 


-2 




















eo*43 


a; 

s 

0> 


Is 


















> 




















<N oj 




nS5 


















1922-19 
Organiz 


ft 

a 
a 


|s 


















Is 




Lscal Years 
by Funds, 


tt 






II 




•*■ <t> 
COtG 


o> 


si 


















*"8 


a 
p. 


'i 




































S3 




§2 




















|| 






As 


















M-l O 




0>2 


















© rH 




1-1 


















d*d 




















© c 




^S 


















S rt 


CO 

"3 


©2 


















.52 tH 






















32 


H 






































s£J 


















o a 




©§> 


















Mi rH 






















g CO 

Jl 


w 

'3 

a 
.9 

o3 

'8 

03 
O 
o3 

10 

a 

- fe 



« 

O 


/^ O 3 « • 

£-*•■- • 

III ; 

*G~ ' 
°*t • 

0> 01 £ O" 

fta»fe t 
a; oi oil-* 4: 

PQQ B 
rH ei eo 


00 

• Q 

a * 

03 iJ 
h as 

§ 1 

o W 
< 

CQ 


. 03 . 
. « . 

.3 . 
•13 . 

:w • 
^^ • 
■§* : 
fe^ • 

~ el : 
o 2 

J! : 

« tn d 

2 ©^i 

3 . 

rW 


T 

e 
1 
> 

■s 


1 

o 

g 

flJB 

» m c 

P 

• 


. 03 
T3 

■ a 

0) 
. ft 

• H 

: h 

: '31= 

• © £ 

ft- 

: "Sjs 

» r 


5 



s 

o 

o o 

1 « 


o> 

a 

o 


c 




§ 


M * 




,_; 












CO 










l-H 










1^ 









122 



FORM AND CONTENTS OF BUDGET 123 

sub-head under "interest," and likewise for the other 
divisions under "fixed charges." By setting up the or- 
ganization units under current expenses, the total expen- 
ditures for administration, operation, and maintenance 
are shown for each organization unit and also the fund or 
funds from which the expenditures are met. If there 
should be several special expendable funds, only the total 
for all such funds should be shown on this schedule and 
this total should be supported by another schedule show- 
ing how it is distributed among the several special funds. 

Schedule 3: Expenditures for Current Expenses Shown 
by Organization Units and Objects 

Schedule 3 supports the column of Schedule 2 cap- 
tioned "totals" so far as it relates to current expenses. 
It shows the total expenditures of each organization unit 
for current expenses distributed among the objects of 
expenditure, that is, among services and commodities. 
This schedule is built up directly from the recapitulation 
sheet (Form F) of the estimates. It is to be used as a 
basis for drafting the appropriation measures in so far 
as the appropriations relate to current expenses (see fol- 
lowing chapter). 

Schedule 4: Expenditures for Acquisition of Property 
Shown by Funds, Organization Units, and Objects 

Schedule 4 supports the totals for the "acquisition of 
property" on the consolidated budget statement. It also 
supports the column headed "acquisition of property" on 
Schedule 2. It shows the funds from which the expendi- 
tures are made, the organization units making the expen- 
ditures and the objects (equipment, buildings and im- 
provements, land) for which the expenditures are made. 






w 
•d 



to 

! 

CO 

*d 
»d 

1 



g * 



a 

w 

o 
co 



a 

■8 
p 

*d 

§ 

« 



§ 

I 



^2 

pig& 
-11 

I.I 


<N 

O 

tN 




W 
<N 

© 

<N 
CN 

C5 




11 




to 
-p.9 

O OS 

a is 
o 




II 

CJH-I 




<4-l ■+» 
O GO 








to 

a 

'g- 

^ OS 

s o 

c3 




gH 

ft -s 

II 







124 



FORM AND CONTENTS OF BUDGET 125 

The figures from which this schedule is built up are taken 
directly from the recapitulation sheet, Form F, of the 
estimates. This schedule is to be used as the basis in 
drafting appropriation measures providing appropria- 
tions for the acquisition of property (see next chapter). 

Schedule 5: Revenues Classified by Sources and Ar- 
ranged by Funds 

Schedule 5 supports "revenues" on the consolidated 
budget statement and the column headed "revenues" on 
Schedule 1. It shows the revenues classified by sources 
and as distributed among the various funds. It sets up 
a column for reference to existing laws providing for the 
various classes of revenues, and another column in which 
is to be indicated all proposed changes in the existing tax 
rates and other revenue charges as well as all new pro- 
posals for raising additional revenues. This schedule is 
prepared directly from the revenue estimates furnished 
by the chief financial officer. If it is desired, as is the 
practice in several states, to show the agencies respon- 
sible under the law for collecting the different kinds of 
revenues, another schedule can be made up for this pur- 
pose that will support this one. 

Schedule 6: Redemption of Debt Not Provided for by 
Sinking Funds 

Schedule 6 supports that part of the "redemption of 
debt" on the consolidated budget statement that is not 
provided for by sinking funds, also the column on Sched- 
ule 1 headed "redemption of debt" in so far as it does not 
relate to payments from sinking funds. This schedule 
shows the amount of the state's debt outstanding for 
which no provisions have been made for redemption by 



§ 

I 

o 

CO 






CO 

I 
s 

CO 



2.2 a fe-s 

p,5 g S fi 



8.8 2 S3 



Wg2£Sj^ 
'43 # « 



2.2 a g^ 



•&* 



-* PS co 



2 a 2 ° a\8 2 



3.B 5<s 
B a, c >, 



«as+Si«as^22 



U w <u ro ' 



-111 






k_ 3 <■» <u ra "h 



<n ^ 5.2 c 2 « S^s 



m2 
41 .8 



126 



FORM AND CONTENTS OF BUDGET 127 

sinking funds and the amount it is proposed to redeem 
during the biennium covered by the budget. The interest 
charges shown on this schedule plus the interest on sink- 
ing-fund bonds and on temporary loans constitute the 
item " interest' ' under fixed charges on Schedule 2 in so 
far as this item relates to the government as a whole. 

Schedule 7 : Sinking -Fund Installments 

Schedule 7 supports the item called " sinking-fund in- 
stallments" on the consolidated budget statement, also 
expenditures from sinking funds as shown under the col- 
umn captioned ' ' redemption of debt" on Schedule 1. The 
condition of each sinking fund is shown, together with 
the proposed annual installments during the period cov- 
ered by the budget. The amount accruing to the sinking 
funds from revenues is shown in detail on Schedule 5. 

Schedule 8: Proposed Bond Issues 

Schedule 8 supports "borrowings" on the consolidated 
budget statement and the column by the same title on 
Schedule 1. It sets forth an itemized list of proposed 
loans for each of the years covered by the budget, show- 
ing the purpose, term, amount, and interest rate of the 
proposed bonds. 

Schedule 9: 'Redemption Requirements and Annual In- 
terest Charges as Affected by Proposed Bond Issues 

As has been pointed out, it is very important in pro- 
posing new bond issues to take into consideration the dis- 
tribution of the redemption of existing debt over future 
years. This is necessary, notwithstanding constitutional 
limitations on indebtedness, in order to spread the ex- 
penditures for the redemption of proposed loans in such 





CO 




a 




CO 




CO 




HH 




TS 




a 




o 


00 


« 


W 


*d 


g 


a> 

CO 

o 


Q 


I 


S 


o 


** 


co 


o 




-M 




a 




a> 




a 




<D 




ii 




$ 




CO 



Annual Re- 
quirements 
Not Pro- 
vided for 
by Sinking 
Funds (for 
example, 
Serial 
Bonds) 




Sinking 
Annual 
Fund 
Require- 
ments 




lis 

2 <-< £5 

C 0) S3 

<3«U 




H pq 




■^<M 1-1 

c] V 

« t 

h- 1 




a 1 2 
I* 




Total 

of 

Previous 

Bond 

Issues 




Total 
Expendi- 
ture 
Required 

for 
Purpose 




Organization 

Unit 
Expending or 

Directing 
Expenditure 




a 
ea 

h-i 

O 

cu 

CO 


ft 

M 
53 
PL, 




Fiscal 
Year 
to be 

Issued 
in 


1922-1923 

Total 
1923-1924 

Total 



128 



FORM AND CONTENTS OF BUDGET 129 

a manner as to even the debt charges over a number of 
years and not to over-burden any particular year. 
Schedule 9 is for the purpose of showing how the budget- 
making authority proposes to distribute the payment of 
proposed loans, and the effect this distribution will have 
upon the redemption requirements of the entire debt for 
each year of a period extending to the date of maturity 
of the longest bonds. This schedule supports Schedule 8. 

The "Budget Message" 

Since people are in the habit of studying the problems 
of government mainly through the medium of newspaper 
stories, they should not be expected to take up and analyze 
a series of dry-looking tables filled with scores of appar- 
ently uninteresting figures in order to understand any- 
thing of the budget plan. What is needed is a story about 
the budget plan written in simple language and set up in 
an inviting style, a story that the newspapers would be 
eager to get and to print in part or as a whole. Such a 
story should constitute the ' ' budget message. ' ' It should 
be prepared by the budget-making authority and should 
explain the important features of the budget plan as pre- 
sented in the consolidated budget statement and the sup- 
porting schedules. Its purpose should be to put the 
budget in the news class with the baseball game, or at 
least to take this most important of all documents coming 
before the legislative body out of the category of the 
usually dry and oftentimes uninforming financial report. 
A letter of transmittal containing a few lines, or an ex- 
planation of the difficulties encountered in preparing the 
budget, such as is commonly found in state budget docu- 
ments, will not do this. 

It must be remembered that the budget is more than 



o 

m 

•a 

CO 
O 

§- 



CD 



CO 
Ctf 

CO 

I 





CO 

cu 


g 


cu 

13 


p 


h- 1 


w 
W 


§ 


CO 


S 
< 




*d 




d 




cj 




CO 




-»-> 




§ 



g 

1 

CD 

2 



§ 

B 

I 
■S 

w 



o-Q 

pQ 



fl-p 

•43X3 



'-3 as 
H— § °> P 






on T3 

■§s§ 



0> 

o> 3 

SCO 

QJ l — I 



*2« 



g-g 
1Q 



o> >, S' oa 

£ £ fe q » 



-^ P.o.St 



fc 



'0} r 



•3 3 

GO 



N W N 



OS o o> 



<N 


5! 


1 


3 


7o 


2 


I 


1 


O 


a 




(N 


<N 


<M 


<N 


(N 


(N 




OJ 


CT> 


OS 


OS 


05 


0) 


o> 


O 


o> 



130 



FORM AND CONTENTS OF BUDGET 131 

just a financial report, it is a plan for the future financing 
of the government that is filled with questions of 
vital interest to every citizen and taxpayer. And there 
is no better way to bring these questions before the people 
than by a clear and concise message that can be read and 
easily understood. Among state budgets the Virginia 
budget, which was presented to the 1920 legislature, fur- 
nishes in the governor's " analysis' ' what is, up to this 
time, perhaps the best example of an attempt to write 
a budget message. In it the governor discusses briefly 
the financial and economic conditions of the state and 
presents certain facts relating to the budget that cannot 
be told effectively by tables of figures. 

What the budget message should discuss, that is, the 
important points that it should lay stress upon, will de- 
pend to a considerable extent upon local conditions. In 
general, however, it should discuss the following : 



1. The outstanding problems of the government's financial 
policy. 

2. Proposed expenditures for current expenses and fixed 
charges as set forth on the consolidated budget statement 
and supporting schedules, explaining the increases or de- 
creases over past expenditures. This may lead to a dis- 
cussion of salary standardization, centralized purchasing, 
uniform accounting, departmental reorganization, per 
capita costs of institutional service, depreciation of build- 
ings and plant equipment, etc. 

3. Proposed expenditures for the acquisition of property as 
set forth on the consolidated budget statement and sup- 
porting schedules. Buildings and important construction 
projects should be explained, and attention should be given 
to the development of a building program for institutions. 
The question of whether the state or the city should acquire 
property or continue to rent may be taken up. 

4. Proposed expenditures for the redemption of debt, setting 
forth the condition of debt and sinking funds of the state 
or of the municipality. 

5. Means of financing expenditures, presenting the present 



132 BUDGET MAKING 

condition of the various funds, explaining any proposed 
changes in existing revenue laws, such as, increase or de- 
crease of tax rate, etc. Discuss fully any proposed bor- 
rowings, giving the amount, term, interest rate and pur- 
pose of proposed bond issues, the requirements to be at- 
tached to their issuance and the effect such issues will have 
upon the redemption requirements and annual interest 
charges of the state or the city debt. 

6. Condition of the various funds at the end of each of the 
years to be financed by the budget. 

7. Statement of the wealth, industries, resources, and taxable 
properties of the state or the city as a basis for measuring 
the proper cost of government and in determining ques- 
tions of policy extending over long periods. 

The budget message should be printed in the budget 
preceding the consolidated budget statement and sup- 
porting schedules, and it should make reference to these 
and the detailed estimates in support of its statements. 

II. Supporting Information 

The supporting information to the budget includes the 
detailed estimates of expenditures and certain statements 
and reports concerning present and past financial con- 
ditions of the government. 

Detailed Estimates 

The detailed estimates should show the complete in- 
formation contained upon the estimate sheets of the vari- 
ous organization units and, in addition, the recommenda- 
tions of 'the budget-making authority for each item or 
group of items. The estimates for the different organ- 
ization units should be arranged in the same order as the 
units are grouped on schedules 2 and 3 preceding. In 
Maryland, Montana, and West Virginia this arrangement 
would be determined by the legal provisions, which re- 
quire the budget to be divided into two parts : I — "Gov- 



FORM AND CONTENTS OF BUDGET 133 

ernmental appropriations," including estimates of ap- 
propriations for (1) the general assembly, (2) the execu- 
tive department, (3) the judiciary department, (4) to 
pay and discharge the principal and interest of the state 
debt, (5) salaries payable by the state under the constitu- 
tion and laws, (6) public schools in conformity with the 
provisions of the constitution and laws, and (7) other 
purposes set forth in the constitution; II — "General ap- 
propriations," including all other estimates. 

A few state budget-making authorities have regarded 
the printing of the detailed estimates as rather unneces- 
sary. In the Illinois budget, submitted to the 1919 legis- 
lature, the supporting estimates showed only the stand- 
ard expenditure titles, all details under each one being 
omitted. Besides, the estimates as printed did not show 
the amounts requested by the various spending agencies 
but rather the amounts approved by the governor follow- 
ing the review and revision of the estimates. That is, the 
governor considered all estimates and data received up 
to the time the budget was printed as preliminary and 
not as official. "When the budget was submitted to the 
legislature, the members asked for more detailed in- 
formation; they wanted to know the amounts requested 
by the spending agencies and the details for which they 
were requested. Thereupon the department of finance 
issued a detailed supplement to the budget, called the 
"book of estimates," which contained the original esti- 
mates in complete form. This is perhaps typical of the 
general attitude of legislatures throughout the country, 
and of the people as well. If they have occasion to feel 
that any information is being withheld from them, they 
immediately protest, even though the information not 
submitted may be of secondary value in the considera- 



134 BUDGET MAKING 

tion of the budget plan. In view of this fact it would 
seem wise to "put all the cards on the table" by print- 
ing in full the detailed estimates as supporting informa- 
tion to the budget plan. Besides, the detailed estimates 
are very often necessary to the proper review and con- 
sideration of the budget by the legislative body. 

Financial Statements and Reports 

Several of the state budget laws, notably those of 
Maryland and Virginia, require that certain supporting 
statements shall accompany the budget, namely, a state- 
ment of the current assets, liabilities, reserves, and sur- 
plus or deficit of the state, a statement of the debts and 
funds of the state, and a statement of the revenues and 
expenditures of the last preceding fiscal year. In other 
words, they require a current balance sheet, a debt state- 
ment, and an operation account for the last preceding fis- 
cal year. Such statements should likewise accompany 
municipal budgets. 3 

The current balance sheet amounts to a photograph of 
the financial condition of the government as of a particu- 
lar day. It shows on one side the assets, such as cash on 
hand, taxes receivable, other accounts receivable, securi- 
ties and investments, stores on hand, etc., and, on the 
other side the liabilities, such as accounts payable, war- 
rants payable, vouchers payable, temporary loans, in- 
terest due, etc., with the resulting surplus or deficit. 

The operation account shows whether the government 
is running ahead or behind financially. It is in the nature 
of a biograph, that is, it shows the revenues and expen- 
ditures as they have accrued from month to month during 

3 See F. Oakey: Principles of Government Accounting and Reporting, 
New York, 1921, pp. 180-258 and 441-469. This book is one of the best 
treatises written on the subject. 



FORM AND CONTENTS OF BUDGET 135 

the year, and the totals accrued and incurred during the 
year. It shows current expenses and fixed charges as 
distinguished from the acquisition of property, also 
whether current expenses have been covered by revenues 
and to what extent expenditures for the acquisition of 
property have been met by borrowings. 

The debt statement shows the total outstanding loans 
of the government, the securities and cash in the sinking 
funds to offset the total debt, and the resulting net debt 
of the government. 

Certain other statements may be added that may also 
be helpful as supporting information to the budget. 
These are a surplus account, showing the condition of 
the current surplus or deficit, a statement of fund bal- 
ances and transactions, a statement of appropriation bal- 
ances and transactions, a statement of stores, and a state- 
ment of fixed property. Any additional information re- 
quired by the legislative body may also be set up in this 
connection. 



CHAPTEE IX 

APPROPRIATION, REVENUE, AND BORROWING 
MEASURES 

According to the practices of nearly all of the states 
having budget methods, the appropriation, revenue, and 
borrowing measures are regarded as documents separate 
and apart from the budget. In a number of the states 
this distinction is made by the budget laws. The ap- 
propriation, revenue, and borrowing bills are generally 
looked upon as being the translation of the budget, or 
financial plan, into the legal form and terminology neces- 
sary for the enactment of the plan into law. 

In municipal practices, however, this is not true. In a 
majority of the cities the only document prepared by the 
budget-making authority and submitted to the legislative 
body is the appropriation ordinance. The attempt is 
made to make this document serve a double purpose; it 
is to be used both as a budget document and as an ap- 
propriation bill. This method of presenting budget in- 
formation is very unsatisfactory. An appropriation bill 
should not be extremely detailed (as will be seen later) 
and unless it is made so in the absence of a budget docu- 
ment, it gives the legislative body no information for pur- 
poses of criticism and review. Besides comparisons with 
past and present expenditures cannot be shown properly 
in an appropriation bill. Cities should follow the states 
in the practice of having two documents or sets of docu- 
ments — one the budget, which sets up the complete finan- 
cial plan and is purely informational in character, and 

136 



APPROPRIATION MEASURES 137 

the other the appropriation, tax, and borrowing ordi- 
nances, which present the budget plan in the legal form 
necessary to put it into operation. 

I. Appropriation Measures 

More than a dozen of the state budget laws provide 
that the budget-making authority shall prepare an ap- 
propriation bill or bills embodying the expenditure pro- 
posals of the budget and shall submit it to the legislature 
along with the budget. This gives the budget-making au- 
thority the power to determine, or at least to suggest, 
the form in which the appropriations are to be made and 
also the conditions to be attached to their expenditure. 
In a number of states even a tentative appropriation bill 
or bills prepared by the budget-making authority has 
been helpful to the legislature when it came to adopt the 
expenditure plan of the budget. For example, in Vir- 
ginia the governor's tentative appropriation bill was ac- 
cepted by the 1920 legislature practically without altera- 
tion, that is, so far as the form, terms, and conditions of 
it were concerned. 

Even though not required by law, there is no reason 
why the budget-making authority should not submit to 
the legislature bills covering its budget proposals. In 
fact, there are good reasons why it should. In the first 
place, when bills to carry out the budget plan are sub- 
mitted with the budget, the legislature has something con- 
crete to refer to its committees and to set to work upon ; 
otherwise the legislature may be inclined to regard the 
budget merely as an administrative report and for that 
reason give little weight to its recommendations. In the 
second place, if the budget-making authority is to deter- 
mine the classification of the estimates, as is done in 



138 BUDGET MAKING 

practically all the states having budget methods, then it 
ought to indicate by means of an appropriation act to 
what detail it thinks the classification should be followed 
in making the appropriations. 

One versus Several Appropriation Bills 

If the expenditure proposals of the budget are to be 
presented in bill form, the question at once arises as to 
how many bills should be submitted. It is argued that 
from the standpoint of adequate handling by the legis- 
lature there is a distinct advantage to a series of bills 
based on the budget. In fact, several of the states allow 
the appropriations recommended in the budget to be set 
up in a number of appropriation bills. In Illinois, for 
example, where it is the practice to put the proposed ex- 
penditures of the budget in six or eight bills, it is claimed 
that everything that would be gained by a single bill in 
the way bf coordinating the various expenditures of the 
budget plan and the legislative discussion of them is se- 
cured through the submission of a comprehensive budget 
by the governor. While this may be true in Illinois, there 
are, in most states, certain advantages to a single appro- 
priation bill, or "budget "bill, ' ' as it is sometimes called, 
containing all the expenditure proposals of the budget. 
The single appropriation bill or ordinance is now quite 
commonly used in cities. 

The budget documents of a majority of the states 
amount to little more than a mere compilation of the esti- 
mates ; nowhere do they present a complete plan of pro- 
posed expenditures and means of financing them. If the 
budget-making authority presents along with a budget of 
this character several appropriation bills containing its 
proposals for expenditures, the legislature is left in the 



APPROPRIATION MEASURES • 139 

dark. Instead of a plan, the legislature has a patchwork 
of proposed expenditures. In such instances the single 
appropriation bill preserves the unity of the budget plan. 
When a number of appropriation bills are used, the ap- 
propriations of a particular organization unit are gener- 
ally scattered through several bills, making it impossible 
to know at once just how much is being appropriated to 
each organization unit. In some cases it takes until sev- 
eral weeks after the legislature has adjourned to deter- 
mine how much money has been appropriated to the vari- 
ous organization units of the government. Several 
states, recognizing the advantages of the single ap- 
propriation act in connection with their budgetary proce- 
dure, require all expenditures of the budget to be pro- 
vided for in one bill. Then all other appropriation bills 
are regarded as supplementary bills, that is, supplemen- 
tary to the budget plan of expenditures, and in some 
states they require a special legislative procedure 
for enactment (see next chapter). 

Form of the Appropriation Bill 

The question of the form in which appropriations 
should be made is very important. The general practice 
in all states and practically all cities is to make the ap- 
propriations to organization units; that is, the agency 
that will be in immediate charge of the expenditure of 
the money is named in connection with the amount ap- 
propriated. This fixes personal responsibility for the ex- 
penditure of the appropriation and for the results to be 
secured as set forth in the budget and appropriation bill. 
In no other way can this essential element in carrying on 
the work of government, namely, responsibility, be so 
well established and maintained. Appropriations might 



140 BUDGET MAKING 

conceivably be made to general functions of government, 
as so much for the development of agriculture, so much 
for the preservation of health, and so on ; but this would 
not fix responsibility for the doing of the work, unless we 
assume the existence of a governmental machine organ- 
ized upon a thoroughly functionalized basis. The organ- 
ization unit then should be the primary factor in making 
appropriations. It provides a sure basis for the estab- 
lishment of accounting control. 

Degree of Itemization of Appropriations 

The next point to be considered is the degree of item- 
ization that should be made of the appropriations under 
each organization unit. This involves the old question of 
the "segregated budget,' ' or rather of the " segregated 
appropriation act," since the budget is mainly a docu- 
ment of information and ought to be as detailed as pos- 
sible. 

Several years ago state legislatures and city councils 
generally made lump-sum appropriations. Then it was 
found that administrative officers having lump sums of 
money at their disposal used it for purposes in no way 
connected with the work they were intended to accom- 
plish. In an attempt to check this abuse the appropria- 
tions were highly and rigidly itemized by the legislative 
body. No money could be drawn from the treasury ex- 
cept in accordance with the details specified in the ap- 
propriation act. This put a check on graft, but, at the 
same time, it bridled the free play of initiative and in- 
genuity in developing efficient administration. The leg- 
islative body had gone too far; it had attempted to de- 
termine for each office who should be employed, what sal- 
aries should be paid, who should be promoted or demoted, 



APPROPRIATION MEASURES 141 

and what kinds and quality of supplies should be used. 
In other words, it attempted to decide every petty detail 
of administration from six to 18 months in advance of 
the time when decisions should have been made. Under 
such conditions the use of judgment in the direction and 
control of the administration was next to impossible. 
Such success in administration as was attained under this 
rigid system of appropriations was the result largely of 
either winking at or disregarding altogether the provi- 
sions of the appropriation act. 

There was another difficulty; detailed itemization of 
appropriations led to increases in all estimates for ap- 
propriations. Governmental agencies asked for more 
than they needed, so that they would not get caught short 
of services, supplies, and materials. When once they got 
the appropriations they asked for they always took care 
to expend all of them if possible, so that none might lapse 
into the treasury. This justified their asking for more 
the next time, and so it continued. Government under 
this scheme cost more than it otherwise should have cost. 

A solution of the problem lies partly in the form of the 
appropriation act, but mainly in the reorganization of 
the government so as to develop responsibility and pub- 
licity and in the adoption and use of modern business 
methods (see Chapter XI and XII). A few states have 
practically solved this problem in so far as it relates to 
the form of the appropriation act by the use of lump-sum 
appropriations supported by itemized schedules and with 
a system of transfers under executive control. For ex- 
ample, the Maryland budget bills, passed by the 1918 and 
1920 legislatures, make two or three lump-sum appropria- 
tions to each organization unit, which are supported by 
schedules itemized to whatever extent it is thought neces- 



142 BUDGET MAKING 

sary for proper control, the schedules being binding upon 
the administrative head unless he can show cause to the 
governor for changes and transfers within the schedule. 
All changes in the schedules must be reported by the gov- 
ernor to the next session of the legislature. In other 
words, Maryland finds it necessary to itemize to some de- 
gree her appropriations to each organization unit, but she 
avoids making this itemization perfectly rigid. After 
all it is the detailed and inflexible itemization of appro- 
priations for current expenses that is harmful to efficient 
administration and adds to the cost of government. 

Classification to Be Used in the Appropriation Bill 

Having decided that some degree of itemization is 
necessary, then comes the question of the classification 
that is to be used in setting up the items of appropriation 
under each organization unit. Should the classification 
of the appropriation items be by functions, or by objects 
(services and commodities) of expenditure? 

Most of the states express the items of their appropria- 
tion acts by objects. Virginia, however, has recently 
adopted the method of making appropriations to func- 
tions. This is not a new idea ; it was tried out about eight 
years ago in New York City and then abandoned. For 
this reason the Virginia scheme of making appropria- 
tions deserves attention at this point. 

The Virginia appropriation act 1 makes appropriations 
in lump sums to what are regarded as the principal func- 
tions of the organization unit. That is, the organization 
unit is told how much money it shall spend for each func- 
tion or activity carried on by it. Then to prevent the 
appropriation accounts from being charged falsely, espe- 

i Ch. 144, Laws 1920. 



APPROPRIATION MEASURES 143 

cially in the case of personal services, the act sets up a 
supporting schedule under the lump-sum appropriation 
to the function in which only objects appear. This means 
that when positive control over the expenditures is de- 
sired, the act resorts to the use of the classification by ob- 
jects (services and commodities). The result is a mixing 
up of both the functional and the object classifications of 
expenditures. This, in effect, curtails the powers of the 
administration even worse than when the appropriations 
are highly segregated by objects ; for while extreme segre- 
gation by objects only determines for the administrator 
just what services and commodities he shall purchase, 
segregation by both functions and objects determines for 
him not only what services and commodities he shall pur- 
chase but how he shall use them as well. For example, 
the Virginia state corporation commission is allowed five 
lump-sum appropriations, one for general administration, 
one for rate regulation, one for regulating public-utility 
companies, one for railroad-service regulation and min- 
eral land assessment, and one for regulating the sale of 
securities. Under each one of these appropriations is a 
supporting schedule setting up all the salaried positions 
to be paid from the appropriation and naming the salaries 
to be paid. From these schedules it can be seen that the 
commission is not only told that it can have eight stenog- 
raphers at specified salaries, but it is told that it must 
use five of these for general administration, and one each 
for rate regulation, for regulating public utility com- 
panies, and for regulating the sale of securities. In other 
words, the commission is told not only what services it 
shall purchase, but how it must use these services when 
it has purchased them. Obviously, this hampers admin- 
istrative ability and ingenuity even more than the most 



144 BUDGET MAKING 

detailed object classification would do, since it takes away 
all discretion of the administrator as to how he shall use 
his employees. In this way the classification by functions 
does not promote efficiency, it only operates as a restric- 
tion on the use that may be made of the services. If an 
appropriation act in such form is strictly adhered to and 
is to work at all, it will necessitate transfers not only 
between classes of objects, as personal services, supplies 
and materials, etc., but also between items within a class 
of objects. 

The actual practice in Virginia in controlling expen- 
ditures, since the passage of the appropriation act noted 
above, has been largely to disregard the functional basis 
of appropriations set forth in this act. In order to con- 
trol the expenditure of the five lump-sum appropriations 
made to the state corporation commission (see above) the 
state auditor's office sets up on the appropriation ledger 
not five accounts, as one would expect, but two general 
accounts— one against which all personal services are 
charged and the other against which all expenses of op- 
eration other than personal services are charged. The 
total amount of each of these accounts was ascertained 
by subtracting from the total of the appropriations to the 
five functions the total of the schedules for personal serv- 
ices appearing under the lump-sum appropriation to each 
of the functions. When the payroll of the commission 
comes to the auditor's office, it is audited against the sal- 
ary schedules set up in the appropriation act and then 
charged against the account for personal services in the 
appropriation ledger. All vouchers for supplies, ma- 
terials, and so on, are charged against the other account 
and no attempt is made to separate them by functions, as 
was evidently intended by the appropriation act. When- 



APPROPRIATION MEASURES 145 

ever an organization nnit has appropriations for capital 
outlays, as buildings and lands, which does not happen 
to be true in the case of the state corporation commission, 
a separate account is set up in the appropriation ledger 
for these expenditures. This makes a maximum of three 
general accounts to a single organization unit, two being 
for services and objects under current expenses and the 
other for capital outlays. The clerk of the corporation 
commission is keeping a set of books in which he is at- 
tempting to allot to each of the five functions set up in the 
appropriation act all of the commission's expenditures. 
This he finds very difficult to do, especially in the case of 
such things as postage and janitorial services. In many 
instances such allotments are merely his estimates of the 
distribution of expenditures. This would lead one to 
question the value for budget-making purposes of ac- 
counts kept on such a basis. 

This discussion should not be taken to mean that the 
legislature might not find it advisable in some instances 
to make appropriations to functions. It does mean, how- 
ever, that appropriations, when made to functions, are 
more difficult to control properly than when they are 
made to objects. When functions are introduced in the 
appropriation act, the appropriation accounts are likely 
to be falsely charged since they are kept on an expense 
or cost-accounts basis. Appropriation accounts are for 
the purpose of setting up authorizations to spend and the 
limitations to the amount of liabilities that may be in- 
curred. Charges against such accounts must necessarily 
be in terms of purchases and payments, that is, they must 
relate directly to objects (services, commodities, and ob- 
ligations). It is the conclusion, therefore, that effective 
control over expenditures can best be established through 



146 BUDGET MAKING 

appropriations made by objects to organization units. 
The objects or classes of objects, however, can be grouped 
to an advantage according to the character of the pro- 
posed expenditures. 

How to Set Up the Appropriation Bill from the Budget 
Statements 

The appropriation bill may be set up directly from the 
information contained on schedules 2, 3, 4, 6, and 7 sup- 
porting the consolidated budget statement ( see preceding 
chapter). These schedules contain practically all the de- 
tails that should be written into the appropriation act to 
insure proper control over the expenditures and, at the 
same time, not to hamper the free exercise of adminis- 
trative ability. The appropriations to an organization 
unit should be set up in the form opposite. 

It will be seen that this exhibit of the appropria- 
tions for an organization unit provides for not more 
than three lump sums, one for current expenses, one 
for fixed charges, and one for the acquisition of property. 
One or two of these headings might not appear, that is, an 
organization unit might not have any appropriation for 
fixed charges or for the acquisition of property. The 
lump-sum appropriation for current expenses is to be ex- 
pended according to the supporting schedule wherein the 
main classes of objects (services, commodities, and ob- 
ligations) are enumerated and the amount allotted to 
each is shown. It is to be provided that transfers can 
be made within this schedule between the several classes 
of objects (see next section). If the government does 
not have sufficient control over the personal services by 
means of employment regulations and standardization of 
positions, salaries, and grades, it might be well to enu- 



APPROPRIATION MEASURES 147 

[Name of Organization Unit] 
For current expenses to be paid from the general fund (if from 
other funds, specify amount from each) on the basis of the 
following schedule $ 000,000 

Schedule i 

Personal services $ 00,000 

Supplies and materials 0,000 

Communication and transportation 0,000 

Subsistence, care, and support 0,000 

Printing, binding, and advertising 0,000 

Heat, light, power, and water 0,000 

Repairs and replacements 0,000 

Rents 0,000 

Insurance 0,000 

Refunds, awards, and indemnities 000 

Total $000,000 

For fixed charges (name fund or funds to be paid from and 

amount from each) as specified below $ 00,000 

Interest $ 0,000 

Pensions and retirements 0,000 

Grants and subsidies 000 . 

Total $ 00,000 

For acquisition of property (name fund or funds to be paid 

from and amount from each) as specified below . . $ 000,000 

Equipment . $ 0,000 

Buildings and improvements: 

Name each project and the amount appropriated for 
it; for example: 

Dormitory $000,000 

Barn 0,000 

Road 000 

Sewer 000 

Purchase of land: 

Name each tract and the amount appropriated for its 
purchase; for example: 

Jones farm 00,000 

Total $000,000 

Total Amount Appropriated to (name organization unit) $0,000,000 

merate under " personal services' ' the principal salaried 
positions and to place some restrictions upon transfers 
to this class from other classes of objects within the 
schedule. No transfers are permitted under fixed 
charges ; the nature of these charges precludes the neces- 

i It is to be provided in the appropriation act that changes and transfers 
may be made within this schedule by the head of the organization unit 
with the approval of the budget-making authority. 



148 BUDGET MAKING 

sity for transfers. Appropriations for the acquisition 
of property should be expended for the purposes for 
which they are made, and for this reason no provisions 
are made for transfers. In the case of buildings and im- 
provements and the purchase of land, it is suggested that 
the objects for which the expenditures are to be made be 
specified; this, for example, would prevent appropria- 
tions for two buildings from being used in the construc- 
tion of only one of the buildings. 

It is a requirement in several states that the appropria- 
tions for the redemption of the state's debt are to be 
taken care of under a separate head and are not to be 
mixed up with the appropriations for organization units. 
If such appropriations are placed under some organiza- 
tion unit, as the department of finance, for the sake of fix- 
ing responsibility for payment, they should be set up as 
a separate head and should indicate how much is going 
into the various sinking funds and how much is for direct 
redemption. This applies likewise to municipal govern- 
ments. 

Conditions to Be Attached to the Appropriation Bill 

The following conditions and terms are regarded 
as essential and should be attached to the appropriation 
bill. Besides these any other terms and conditions that 
the legislative body may think necessary may also be at- 
tached. 



The date when and the period for which appropriations 
are to be available should be specified. Likewise the or- 
ganization units responsible for the expenditure of the 
appropriations should be specified. All appropriations 
should be available only for the payment of liabilities in- 
curred during the fiscal period for which such appropria- 
tions are made and, at the end of this time, any unex- 



APPROPRIATION MEASURES 149 

pended and unencumbered balances should revert to the 
treasury. This, of course, will depend upon the constitu- 
tional and legal provisions surrounding the government. 

2. It should be provided that transfers may be made within 
the schedules supporting the lump-sum appropriations for 
current expenses to the various organization units. The 
schedules should indicate the initial distribution of these 
appropriations among the different classes of objects (ser- 
vices, commodities, and obligations). Each lump-sum ap- 
propriation should be paid out in accordance with the sched- 
ule that relates to it, unless and until such schedule is 
amended. The chief executive should make transfers in the 
appropriations for current expenses of his own office, and 
perhaps the legislative body should do the same thing. All 
other transfers should be made upon a request from the 
head of the organization unit, which should be approved by 
the budget-making authority and a copy of it transmitted 
to the auditor or comptroller before becoming effective. 
The auditor or comptroller should be required to pay out 
the appropriation, or whatever balance may remain, in ac- 
cordance with the amended schedule. Finally, it should be 
provided that all transfers and changes in the schedules, 
made or approved by the budget-making authority, should 
be reported in the next budget. 

3. It should be provided that no person shall be employed 
whose compensation is to be paid out of the amounts set 
aside for " personal services" in the schedules under the 
lump-sum appropriation for current expenses, except in 
conformity with the standardized list of positions, salaries, 
and grades as adopted by the budget-making authority or 
the civil service commission. 

4. It should be provided that no contract or agreement shall 
be entered into for the purchase of supplies, materials, and 
equipment except in conformity with the standard specifi- 
cations and regulations established by the budget-making 
authority or the purchasing agent to govern the purchase 
of such commodities. 



Kinds of Appropriations to Be Avoided 

It is becoming more and more the practice among states 
and cities to appropriate for specific purposes definite 
sums of money for stated periods of time, as one or two 
years. This practice is in harmony with the budget 



150 BUDGET MAKING 

theory, that is, the idea of carefully planning every year 
or every biennium all the government's expenditures, tak- 
ing into consideration at that time all expenditure needs 
and the resources to meet these needs. Several states 
and a number of cities, however, that have adopted budget 
methods, continue to make appropriations that are in- 
definite in amount, or that authorize the expenditure of 
receipts from certain revenues, or that, when once made, 
recur annually and may run on indefinitely. These kinds 
of appropriations may be characterized respectively, as : 
indefinite appropriations, revenue appropriations, and 
"continuing" appropriations. In authorizing the expen- 
diture of money such kinds of appropriations should be 
avoided as far as possible. 

Indefinite Appropriations 

Indefinite appropriations are those in which the amount 
to be spent is not specified. They are merely authoriza- 
tions to spend for a certain purpose or a particular activ- 
ity an amount necessary to accomplish the purpose or to 
carry on the work. It is impossible to formulate a bud- 
get plan upon such a basis of expenditure; not knowing 
definitely, or even approximately, the amount to be ex- 
pended, it is practically an impossibility to plan definitely 
a means of financing such expenditures. Besides, ade- 
quate control, cannot be exercised over the expenditure 
of such appropriations. 

Revenue Appropriations 

Eevenue appropriations are authorizations to expend 
the receipts from certain revenues. In addition to being 
indefinite in amount, such appropriations are usually 
met by revenue receipts that are collected and expended 



APPBOPRIATION MEASURES 151 

without being turned into the treasury. A common ex- 
ample is the payment of salaries by fees. With such a 
system of appropriations it is impossible to make the 
budget plan complete ; always there are certain expendi- 
tures and receipts that cannot be accurately taken into 
account. The most satisfactory plan, from the stand- 
point of the budget, is to have all such receipts turned 
into the treasury while all expenditures are made upon 
appropriations from the treasury. Otherwise, it is im- 
possible for the government to exercise any degree of 
control oyer such expenditures. 

"Continuing" Appropriations 

"Continuing" appropriations are authorizations to 
spend, which, when once voted by the legislative body, 
permit expenditures to be made annually in the same 
amount until changed by a subsequent act of that body. 
Wisconsin is the most notable example of a state that 
has a system of continuing appropriations. Very re- 
cently Delaware, Kentucky, Maryland, Michigan, North 
Carolina, North Dakota, and Vermont have abolished by 
law or discontinued by practice continuing appropria- 
tions. 

The arguments advanced in support of a system of 
continuing appropriations, as applied particularly to 
states, are: 2 (1) that "they continue until the law- 
making agencies have actually determined upon a change 
and positively expressed it," thus preventing a failure 
on the part of the legislature to appropriate from shut- 
ting down departmental and institutional work; (2) that 
such appropriations permit administrative agencies to 

2 See E. A. Fitzpatrick, Budget Making in a Democracy, New York, 1918, 
pp. 85-97 and p. 296. 



152 BUDGET MAKING 

plan definitely for the future, which they cannot do if 
they live under the il cataclysmic theory of administra- 
tion/ ' that is, merely getting enough to go ahead on for 
one or two years at a time; and (3) that continuing 
appropriations "prevent, to a considerable degree, leg- 
islative manipulation, and reduce the need for adminis- 
trative l dickering ' with the legislature.' ' 

The first argument, concerning the possibility of a 
deadlock in the legislature, is answered by the Kentucky 
budget law, 3 which repealed all continuing appropria- 
tions and provided that "in event the general assembly 
shall fail or refuse to make appropriations for the en- 
suing biennium, then the appropriations for such preced- 
ing year for each of said departments, boards, institu- 
tions, commissions, or agencies shall continue until 
changed by the general assembly.' ' 

The second argument, as to planning by departments 
and institutions over a series of years, emphasizes the 
needs of the individual spending agency at the expense 
of the needs of the state as a whole and takes a rather 
narrow view of the problems of budget making. It is not 
the idea of the budget system that each organization unit 
of the state government shall make a plan and shall carry 
out that plan as far as possible independently of and 
without regard for the other organization units, but that 
each organization unit shall make a plan and shall sub- 
mit that plan to a central authority, the budget-making 
authority, who is in a position to view the needs of all the 
organization units of fhe state and whose duty it is to 
work out from the individual plans, taking into considera- 
tion the financial condition of the state and the social 
needs of the people, a master plan for carrying on the 

3 Ch. 12. Laws 1918. 



APPROPRIATION MEASURES 153 

work of the state government. After this master plan 
has been considered, changed if need be, and approved by 
the legislature, then it is the duty of each organization 
unit to expend the money appropriated to it not as if it 
were a separate and independent agency, but as one of 
several cooperating agencies designated to carry on the 
work of government. The system of continuing appro- 
priations takes root in the administrative organization 
of the state. It involves a vital question, namely, inde- 
pendent board government, like that of Wisconsin versus 
an integrated administrative system toward which Illi- 
nois and several other states are working (see Chapter 
XII). If the state administration is to be broken up into 
a number of boards and commissions, each working more 
or less independently of the other, then continuing ap- 
propriations are desirable, certainly so from the stand- 
point of the administrative agencies. But if the state 
administration is to be departmentalized and integrated 
under a responsible, chief executive, then continuing ap- 
propriations are undesirable, if not unworkable, and 
should be abandoned for unified financial planning. 

The third argument for continuing appropriations, 
namely, that they prevent legislative manipulation and 
reduce the need for administrative dickering with the 
legislature, assumes that each administrative agency, 
when once granted a continuing appropriation, will be 
contented with it and will not seek changes and increases 
from the legislature. Such an assumption is not true; 
the majority of administrative agencies, even in Wiscon- 
sin, seek increases or, at least, changes in their appro- 
priations every time the legislature meets. This being 
the case, is there likely to be less manipulating and dicker- 
ing with the legislature under an administrative system 



154 BUDGET MAKING 

in which all the administrative agencies, being practically 
independent of each other and subject to no central au- 
thority, can go directly to the legislature with their re- 
quests or under an administrative system in which au- 
thority is centralized in a responsible executive and all 
requests must clear through his office! The answer is 
obvious. The remedy, then, is not continuing appropria- 
tions but administrative reorganization. 

The real reason for continuing appropriations, as 
viewed from the standpoint of the administrative agency, 
is that they provide a means of permanent support, a 
sort of endowment on the part of the state, and afford, 
therefore, a source of security. Changes in such ap- 
propriations can be made only by a majority vote of both 
houses of the legislature. If, as is the case in Wisconsin, 
the administrative agencies are organized under boards 
whose members have long and overlapping terms, the pos- 
sibility of exercising any central administrative control 
over them is slight. Under such a system moss-covered 
agencies and agencies incompetently managed may con- 
tinue indefinitely. Certainly the tendency in state legis- 
latures is to let agencies continue rather than to cut them 
off. When the question is left wholly to the legislature, 
it is quite possible for even a small minority of that body 
to perpetuate unnecessary agencies. After all, the im- 
portant thing is the work to be accomplished, not the 
preservation of the agency ; the agency is only the means 
of accomplishing the work. The budget should make 
provisions for doing work, not provisions for endowing 
governmental agencies. 



APPROPRIATION MEASURES 155 

II. Revenue and Borrowing Measures 

As a complement to the appropriation bill, the budget- 
making authority should prepare revenue and borrowing 
measures so far as such measures may be required to 
finance the proposed expenditures and should submit 
these to the legislature along with the budget and budget 
bill. If the budget-making authority proposes to expend 
more money than can be raised under the existing revenue 
laws, it should propose measures by which the additional 
revenues are to be raised ; the legislature should not dis- 
cuss and pass upon appropriation bills without consider- 
ing, at the same time, the sources of income to meet these 
bills. The growing demands upon state and city treas- 
uries alike make it impossible to decide wisely upon ex- 
penditures before the problems of the means of meeting 
these expenditures are taken into account. Some work 
may be wisely inaugurated if means are available, or 
postponed until a later time if they are not. 

Revenue Measures 

Practically all the states provide for the raising of 
money from the different sources of revenue by general 
laws. When once enacted, these laws continue in force 
until amended or repealed. As a result the annual in- 
come from the majority of the sources of state revenue 
is practically fixed. In order to give some flexibility to 
the .amount of income from revenue, several of the states 
and all of the cities use the general property tax as the 
variable quantity and, within certain limits, increase or 
decrease their income from revenue by increasing or de- 
creasing the rate of this tax. A few states, for example 
Alabama and Tennessee, revise and reenact practically 



156 BUDGET MAKING 

their whole revenue system at frequent intervals. In 
general, however, the budget-making authority would con- 
fine its revenue measures to changes in the rates of exist- 
ing taxes or to proposals for new sources of revenue. 
The exact form that such measures would take will de- 
pend upon the requirements and practices of the particu- 
lar state, hence no suggestions are here offered as to 
form. 

It has been done in a few states, and is advisable, 
if possible, to bring together all revenue-raising pro- 
visions of the state laws in one chapter or article. 
This has the same advantages from the standpoints of 
legislative consideration and easy reference as the single 
appropriation act. States need also to do this because 
they should give increasing attention to their revenue 
laws. 

Borrowing Measures 

If the budget-making authority proposes to borrow a 
certain amount of money to carry out its expenditure pro- 
gram, it should draft and submit to the legislative body 
measures for this purpose. Such bills, subject to the con- 
stitutional provisions placed upon the contraction of debt 
by the state or the city, should specify the purpose of the 
debt, the kind of bonds to be issued, the term of the bonds, 
the rate of interest, and make provisions for redemption. 



CHAPTER X 

LEGISLATIVE CONSIDERATION AND ACTION ON 
THE BUDGET 

This chapter will consider briefly what legislative or- 
ganization is best calculated to secure effective action on 
the measures submitted to the legislative body by the 
budget-making authority for carrying out the budget 
plan, also what legislative procedure is most likely to 
arouse public interest and scrutiny of the budget and to 
develop public opinion on the financial affairs of the 
government. 

I. Legislative Organization for Handling the Budget 

The Bicameral System and the Conference Committee 

All our state legislatures are composed of two houses, 
the main arguments for the bicameral system being that 
one house acts as a check upon the other in preventing 
hasty and ill-considered legislation and that double con- 
sideration of measures, especially financial measures, as- 
sists greatly to inform public opinion. Experience, has 
shown, however, that this is not always the case. In 
fact, these advantages do not result because of any in- 
herent virtue in the bicameral system, but depend to a 
very large extent upon the character of the rules gov- 
erning legislative procedure a»d the care and precision 
with which these rules are enforced. 

One product of the bicameral system that should be 
especially noticed in this connection is the conference 

157 



158 BUDGET MAKING 

committee. It is the means of settling differences of 
opinions between the two houses. For example, when the 
two houses cannot agree upon the contents of or amend- 
ments to an appropriation bill, a committee of two or 
three members from each house is appointed to adjust 
the points at issue. This committee meets behind closed 
doors to do its work and no written record is kept of its 
acts. When it has reported, the houses must accept its 
report without amendment. Obviously, such procedure 
has no place in the consideration of the measures con- 
nected with the budget. If the bicameral system is to be 
continued, steps should be taken to coordinate the work 
of the two houses in such a way as to avoid, as far as pos- 
sible, the use of the conference committee. Even if the 
meetings of the conference committee were made public 
and its acts were a matter of public record, it is not the 
proper agent to settle issues concerning the budget policy 
of the state — this is the business of the legislature as a 
body. 

In city governments the single-chambered council has 
been gradually taking the place of the double-chambered 
council, until now only a few cities retain the bicameral 
system. Quite recently (1919) Philadelphia abolished 
its large, unwieldy, two-chambered legislative body and 
constituted a comparatively small council, consisting of 
21 members. Among the larger cities (over 200,000 popu- 
lation), only four, namely, Baltimore, Kansas City, 
Louisville, and Atlanta still retain two-chambered legis- 
lative bodies. 

One of the principal contributions of the commission 
and the city-manager forms of government has been to 
do away with cumbersome city councils and to establish 
small legislative bodies, usually consisting of five or seven 



CONSIDERATION OF BUDGET 159 

members, that are continuously in direct touch with the 
administration of the government. The centralized 
mayor-council form of government has also worked in 
this direction. This simplification of legislative organ- 
ization in cities has been conducive to better financial 
planning and greater legislative efficiency, especially in 
the city-manager and responsible-mayor forms of gov- 
ernment. States might well profit in this regard by the 
experience of cities. 

Standing Committee System 

Under the present organization of our state legisla- 
tures all bills are customarily referred to standing com- 
mittees for consideration and report before being taken 
up and acted on by the houses themselves. Several states 
have six or eight separate committees concerned with the 
consideration of appropriation measures and the means 
of financing them. For example, Ohio has six commit- 
tees, three in each house, concerned with appropriations, 
with the raising of revenues, and with the settling of 
claims. These six committees, acting independently of 
each other, are charged with the consideration of the 
budget plan presented by the governor. Each one pro- 
ceeds to report out bills and to make recommendations to 
its particular house with very little knowledge of what 
the others are doing. A few states have constituted joint 
committees, thus insuring a certain amount of working 
cooperation between the two houses and avoiding, to a 
large extent, the use of the conference committee. Con- 
necticut and Maine, for example, have systems of joint 
standing committees. In New Jersey and New York 
the two committees concerned with appropriation meas- 
ures act jointly in practice. The budget laws of Virginia 



160 BUDGET MAKING 

and a few other states require the standing committees 
in charge of appropriation measures to act jointly. 

These are attempts to change the organization of the 
standing committee system so that it will work with some 
degree of efr ectiveness in the consideration of the budget. 
But if the unity of the budget plan is to be preserved, fur- 
ther change is necessary. There should be a single joint 
committee of the two houses charged with the considera- 
tion of the entire budget plan, including appropriations 
for all purposes, revenues, borrowings, and other means 
of financing expenditures. This would require that the 
committees of the two houses be uniformly organized. 
There would also be an advantage in having the commit- 
tee organization planned to fit in with the administrative 
organization where it has been reorganized and consoli- 
dated, thus permitting the departments to cooperate and 
advise with the committees on administrative measures. 

II. Legislative Procedure on the Budget 

Submitting the Budget to the Legislature 

The budget laws of about three-fourths of the states 
require the budget to be submitted to the legislature by 
the budget-making authority either at the beginning of 
the session or some time during the first month of the ses- 
sion. In several cases, where the budget-making author- 
ity is the governor and the law requires the budget to be 
submitted at the opening of the legislative session, the 
out-going governor must prepare the budget for the in- 
coming governor, that is, the old administration does for 
the new administration what it should do for itself. 
Maryland and a few other states have recognized this 
defect and have provided that the newly-elected governor 



CONSIDERATION OF BUDGET 161 

shall prepare the budget and shall have a longer period 
before presenting it to the legislature than a governor 
who has been in office for some time. Another solution 
of this problem has been suggested for states having 
biennial sessions of the legislature, namely, that the gov- 
ernor be inaugurated between the legislative sessions 
rather than at the beginning of such sessions. However, 
if the governor has the proper staff assistance and is 
given six weeks or two months after coming in office to 
prepare his budget, this would seem to solve the problem. 
In a great many cities under the mayor-council form 
of government the budget is prepared by the out-going 
administration, and in some instances even passed by the 
council before the in-coming administration takes office. 
The period of budget making should be so arranged in 
these cases as to require the new administration to pre- 
pare the budget just after it comes into office. In most 
instances this can be done with slight charter changes. 

The "Budget Speech" 

What should be made a very important feature, espe- 
cially in state budget making, at the time of submitting 
the budget to the legislature is the " budget speech." 
The preparation and delivery of this speech should be the 
duty of the governor, either as budget-making authority 
or as chairman of the board, in case the budget-making 
authority is a board. Such a speech should present a 
resume of the budget plan, and should be made to the 
houses of the legislature in joint session. It is an ex- 
cellent means of giving publicity to the budget plan 
immediately it is laid before the legislature. It would 
explain to the people the salient features of the budget 
program, and would give the budget such an unusual set- 



162 BUDGET MAKING 

ting in its introduction as to stimulate the interest of the 
legislature in the study of the plan. 

Budget speeches are not without precedent in this coun- 
try. Governor Cox of Ohio appeared before the 1917 
legislature in joint session and spoke to them on his bud- 
get. In 1919 Governor Lowden of Illinois and his direc- 
tor of finance addressed a joint session of the two legis- 
lative houses on the budget as presented to the legisla- 
ture. In 1919 Representative Benjamin Loring Young, 
chairman of the house ways and means committee of the 
Massachusetts legislature, addressed that body on the 
finances of the state and the fiscal program outlined by 
the governor in his budget recommendations. This 
speech was quoted by the newspapers of the state and 
commented upon as a worthy and notable contribution in 
the field of state budget making. 1 

Procedure in Considering the Budget 

Only about half of the state budget laws contain any 
provisions with regard to legislative procedure in consid- 
ering the budget. The best examples of such provisions 
are those of Maryland and Virginia. The Maryland 
budget ariiendment provides that the budget bill sub- 
mitted by the governor to the presiding officers of the two 
houses shall be introduced immediately by them in their 
respective houses. The governor is given authority to 
amend or supplement the bill while in the legislature; 
and it is provided that the governor and such adminis- 
trative officers as have been designated by him shall have 
the right, and, when requested by either house, it shall 
be their duty to appear and be heard with respect to the 

1 See L. H. Gulick, Evolution of the Budget in Massachusetts, New York, 
1920, pp. 176-182. 



CONSIDERATION OF BUDGET 163 

budget bill during its consideration. Under this proce- 
dure, however, the Maryland legislature has failed to de- 
velop effective review and criticism of the governor's 
budget plan. The standing committees of the two houses 
in charge of appropriations continue to work separately 
and their meetings are not usually public. There is very 
little discussion of the budget on the floors of the legisla- 
ture. Publicity is not encouraged. 

The Virginia budget law provides that the standing 
appropriation committees of the legislature must begin 
within five days after the submission of the budget to 
hold joint and open sessions on the budget. This joint 
committee may require representatives of the spending 
agencies to appear before it and may hear all persons in- 
terested in the estimates. The governor, or his repre- 
sentative, and the governor-elect are given the right to 
attend the meetings of the committee which are in the 
nature of public hearings, and to be heard on all matters 
coming before the committee. In Virginia, as in Mary- 
land, the procedure used does not encourage and stimu- 
late discussion of the budget plan on the floors of the 
legislature. 

The ordinary standing committee procedure on the bud- 
get does not insure adequate discussion and publicity of 
the budget proposals. A procedure is needed that will 
bring the discussion and action on the budget plan into 
the open before the public eye. Some have recommended 
that state legislatures employ the committee-of-the- 
whole procedure in the consideration of the budget. Un- 
der committee of the whole the two houses of the legis- 
lature are informally organized so as to enable them to 
become critical agencies of the financial plan submitted 
by the budget-making authority. It permits non-mem- 



164 BUDGET MAKING 

bers, as the governor and the administrative officers, to 
come before the legislature to explain and defend their 
requests and to answer questions concerning the budget 
plan. The legislature would hold public hearings on the 
budget proposals under such a procedure. After the re- 
quests of each organization unit were discussed and voted 
on, the budget as a whole would be taken up and brought 
to a vote, then the committee of the whole would rise and 
report. This consideration would take place directly 
after the budget was submitted to the legislature, after 
which the budget-making authority would be allowed to 
amend for passage its appropriation and revenue meas- 
ures on the basis of the information developed during the 
committee-of-the-whole procedure. 

In view of the rather disappointing experience in some 
states with committee-of-the-whole procedure it might be 
more effective to permit of administrative participation 
in the legislative discussion of the budget under ordinary 
procedure. The budget laws of some half-dozen states 
provide for the participation of the governor and spend- 
ing officers in the legislative discussion of the budget. 
If this provision were applied to all the states and seri- 
ously regarded by the legislature, it would certainly af- 
ford good opportunities for publicity on the state 
finances. Not only should the legislature require the 
administrative officers to appear before it, but these of- 
ficers, since they are responsible for the expenditure of 
the moneys appropriated to them, should have the right 
to appear upon the floors of the legislature and make such 
statements as they may think necessary. In this way in- 
telligent leadership would be developed in the administra- 
tion and the members of the legislature would be better 
informed on the subject of state finances. A staff should 



CONSIDERATION OF BUDGET 165 

be provided for the legislature through which it might 
gather independently information relating to the budget. 
The legislature would then become a real criticizing agent 
of the budget and publicity in the legislative handling of 
financial measures would be practically insured. 

City councils, too, are generally lax in their considera- 
tion of the budget. While they could work under a com- 
mittee-of-the-whole procedure in considering city finances 
even more effectively than state legislatures, since they 
are nearly all unicameral bodies and, in most cases, are 
comparatively small bodies, they do not attempt to do so 
to any considerable extent. In the larger cities the coun- 
cil has a finance committee that considers the budget and 
reports to the main body its recommendations for appro- 
priations. The procedure used in adopting these recom- 
mendations is much the same as in state legislatures and 
permits of very little publicity. 

Since city councils meet frequently throughout the 
year, they usually make numerous changes in the budget 
plan before the year to which it relates is completed. In 
one way states have an advantage over cities in this re- 
gard, since state budget plans when once adopted are 
not " tinkered with" by the legislature during the year. 
In another way, states are at a disadvantage over cities 
because when emergencies arise or rapidly changing con- 
ditions call for some revision of the original state budget 
plan, it cannot be made without considerable delay and 
expense arising from the calling of an extra session of 
the legislature. 

Action on the Appropriation or Budget Bill 

Practically all the states that provide for an appropria- 
tion or budget bill to be prepared by the budget-making 



166 BUDGET MAKING 

authority and to be submitted with the budget require 
that this bill be finally acted upon by the legislature be- 
fore other appropriation bills are passed. Three of these 
states, Maryland, West Virginia, and Utah, fix limitations 
upon the power of the legislature to increase all or part 
of the items of appropriation contained in the budget 
bill. The most rigid set of such limitations is contained 
in the Maryland budget amendment. Under the pro- 
visions of this amendment the legislature cannot amend 
the governor's budget bill to change the public-school 
funds, or salaries and obligations required by the con- 
stitution ; it may increase or decrease the items relating 
to the general assembly, or increase those relating to the 
judiciary, but can only reduce or strike out others. It is 
further provided that the legislature shall not consider 
other appropriations until the budget bill has been 
finally acted upon. By this latter provision the leg- 
islature is not only prevented from passing but from 
even considering other appropriations, which might pre- 
clude emergency measures of great urgency, until it has 
finally acted upon the governor's bill. After the budget 
bill has been voted, the Maryland amendment permits 
that the legislature may initiate supplementary appro- 
priations, provided every such appropriation shall be 
embodied in >a separate bill, limited to a single purpose, 
shall provide the revenues necessary to pay the appro- 
priation thereby made by a tax, direct or indirect, to be 
laid and collected as shall be directed in said bill, shall 
receive the majority vote of the elected members of each 
house, and shall be presented to the governor and be sub- 
ject to his veto. 

Provisions, such as the above, seek to bring about by 
negative control over the acts of the legislature what 



CONSIDERATION OF BUDGET 167 

should be brought about by positive action in reorganiz- 
ing the state administration. Certainly, in the past, state 
legislatures have been spendthrifts with the people's 
money, but they have been " aided and abetted" in their 
actions by the officers and agents of ramshackle and non- 
integrated administrations. As long as the state govern- 
ment is composed of 50, or 100, or 150 more or less inde- 
pendent units and agencies, each practically free to im- 
portune the legislature for appropriations, some way will 
be found to grant their requests, although the power to 
initiate appropriation bills drawing directly upon exist- 
ing funds of the state treasury may be denied to the legis- 
lature. Anyhow, the legislature cannot be deprived of its 
power to determine policy; and so long as it enjoys the 
exercise of this power it can enact laws that will involve 
the expenditure of money without any direct appropria- 
tions being made. The effect is the same. 2 

The operation of the budget under the reorganized Illi- 
nois administration has already largely disproved the 
theory that the executive budget is workable only after 
changes have been made in the constitution limiting the 
power of the legislature in the matter of making appro- 
priations. Here the governor, through his department of 
finance, has complete control over all the expenditures 
of the code departments, consequently he does not have 
to expend more than he deems necessary to carry on the 
work, no matter how much the legislature may authorize. 
However, the Illinois legislature, during each session, 
enacts several bills containing appropriations for local 

2 Among the cities of the country Boston is perhaps the most notable 
example in which the power of the legislative body to appropriate city 
funds is seriously limited. No proposal to spend money may be originated 
except by the mayor, and no expenditure proposed by the mayor may be 
increased by the council. In case an item is reduced by the council, the 
reduction is subject to the mayor's veto. 



168 BUDGET MAKING 

purposes over the expenditure of which the governor has 
little control, but he has the power to veto such measures. 
These measures are considered in the next paragraph. 

Special Appropriation Bills 

Special appropriation bills, usually referred to as 
"pork-barrel" measures, are those bills fostered by mem- 
bers of the legislature that contain appropriations for 
local purposes. The passage of such bills by the legis- 
lature has been a growing evil in a number of the states. 
The New York legislature stands at the top of the list 
on the passage of special appropriation bills; more than 
a hundred such bills, totaling several million dollars, 
were passed by the 1920 session and became laws with 
the governor's approval. 

Conditions such as this one, have prompted states like 
Maryland to set limitations upon the action of the legis- 
lature with reference to all appropriation bills initiated 
by that body. But a legislative procedure that compels 
publicity on such measures will do more than constitu- 
tional restrictions to prevent the passage of pork-barrel 
appropriations. The actions of legislators are controlled 
more by the fear of public opinion than by reverence for 
the provisions of the constitution. As a means of pre- 
venting pork-barrel legislation the governor's veto power 
does not seem to work very effectively. 

In handling special appropriation bills the same open 
and above-board procedure should be used as is recom- 
mended for the consideration of the budget measures 
proper. Before final action on such bills the effect they 
will have upon the budget plan should always be taken 
into consideration. In order to prevent attempts to rush 
such bills through the legislature during the closing days 



CONSIDERATION OF BUDGET 169 

of the session two things are necessary: one is reform 
in the legislative procedure, as commonly practiced, for 
handling bills ; and the other is a legislative session with- 
out any limit as to length. The legislative rules should 
set a time limit on the introduction of all bills, say, not 
later than the end of the first month of the session ; should 
establish a joint committee of the two houses for the con- 
sideration of all appropriation and revenue measures, as 
already recommended in this chapter; and should set a 
time limit on the reporting out of bills by this committee 
as well as all other committees. 

This is in brief the procedure now used in Massachu- 
setts, where it has operated very effectively in preventing 
congestion at the close of the session. A strict time limit 
is set by Joint Legislative Rule No. 12 upon the introduc- 
tion of bills, none being received after the end of the sec- 
ond week of the -session. While this rule is not always 
adhered to, its effect is very salutary. Concurrent action 
by four-fifths majority of each house is necessary to sus- 
pend it. This makes possible the enforcement of a second 
rule (Joint Rule No. 10), which requires the joint com- 
mittees to make final report on all bills early in the ses- 
sion, and also that all bills that are not reported out by 
the committees be referred to the next legislature. Under 
this rule the legislature knows by the middle of April, at 
the latest, just how much business remains to be accom- 
plished. After that date the session usually continues 
for two more months, there being no limit on the length 
of the session. Under this procedure each committee is 
required to report to the legislature each week the status 
of business before it. This enables the presiding officers 
to apply pressure wherever it is necessary to spur up the 
committee work. 



CHAPTER XI 

BUSINESS STANDARDS AND METHODS NEEDED IN 
CARRYING OUT THE BUDGET 

In carrying into operation the budget plan three im- 
portant problems demand especial consideration, namely, 
employment, purchasing, and accounting. These are the 
big general problems of administration; these are the 
problems that are more or less common to the work of all 
agencies of government. As a measure of the importance 
of employment and of purchasing, it has been estimated 
that from 60 to 80 per cent of the current expenditures of 
state and city governments is made in payment for the 
services of persons and for the purchase of supplies and 
materials. Obviously then, if the budget system is to be 
made eff ective as a means of financial control, standards 
and methods for determining efficiency in employment 
and for promoting economy in purchasing should be 
adopted and used. It is also very essential that all ex- 
penditures of state and municipal governments should 
be controlled by accurate and efficient methods of account- 
ing and reporting. Without the facts developed by such 
methods the budget cannot be made a complete and re- 
liable document of information. 

I. Employment Standards and Personnel Control 

If the work that is planned by the budget is to be suc- 
cessfully carried out, there must be efficient administra- 
tion. Good administration depends to a very large degree 
upon the training and ability of public employees. The 

170 



BUSINESS STANDARDS AND METHODS 171 

employment of such persons presents a number of prob- 
lems, such as, classification of positions, standards of 
compensation, methods of rating efficiency, and so on, 
that are particularly related to the subject of budget 
making. 

Questions Involved in Public Employment 

For the purposes of this budget-making discussion the 
whole problem of public employment may be resolved into 
three questions, as follows: 

1. What jobs are necessary? 

2. What should efficient incumbents be paid? 

3. How can efficient employees be secured and re- 
tained? 

The first one of these questions involves a considera- 
tion of the general policy and administrative organization 
of the government. The second one involves a study of 
positions and salary rates. The third one directs atten- 
tion to the methods of securing and retaining efficient 
services. These will now be taken up in the order named 
above. 

Relation of Personnel to Administrative Organization 

There is a chain of processes involved in the building 
up of an organization unit or agency of government for 
administrative purposes. In the first place, there is the 
development of the policy, in other words, a determination 
of the work to be done, as explained in Chapter III. In 
the second place, there is the establishment and develop- 
ment of the organization unit or agency to carry out the 
policy, that is, to do the work. Action by the legislative 
body is not usually taken beyond this point. After the 
work has been departmentalized, there is the distribution 



172 BUDGET MAKING 

of the related activities among bureaus, divisions, and, 
finally, individual positions. Then follows the adoption 
of time-saving methods and effective procedure for carry- 
ing on the business of the department. The internal 
structure of the organization and the methods of man- 
agement are ordinarily and more properly left to those in 
charge of the department. It is the duty of the depart- 
ment head to determine the minimum number of posi- 
tions of each class needed to handle the work of the dif- 
ferent bureaus and divisions. The classes and numbers 
of positions needed will depend upon the general organ- 
ization, the extent to which overlapping and duplication 
is avoided, the methods and procedure used, and ques- 
tions of general administrative ability. The subject of 
general administrative organization and its relation to 
the budget will be considered at length in the next chapter. 

Classification of Positions a/nd Standard Bates of Com- 
pensation 

In the majority of states and cities the salary and wage 
rates for positions involving like duties and responsibil- 
ities and calling for practically the same qualifications 
show wide variations. The rates for positions of the 
same kind or class are different in different departments 
and agencies. Usually state and city governments have 
no standards to guide in fixing the pay of employees and 
no working plan for relating the salaries appropriated 
to the character and importance of the work for which 
such salaries are to be paid. The designations of posi- 
tions appearing in the budget estimates are, in a large 
number of cases, inaccurate and misleading, still the ap- 
propriations must be based on these. Often there is a 
large number of unnecessary titles of positions that might 



BUSINESS STANDARDS AND METHODS 173 

easily be reduced. Usually there is an absence of any 
uniform plan or system for regulating increases in the 
pay of employees. 

These conditions in state and municipal employment 
should be met by a careful study in each case of the kinds 
of positions and the rates of pay from which would be 
worked out a classification of positions and standard 
rates of compensation. This classification and rates of 
compensation should be administered by the civil-service 
commission in those states and cities that have such com- 
missions and in other states and cities by some agency 
of general administration, like a department of finance. 
The civil-service commission or other agency would rec- 
ommend to the budget-making authority amendments to 
the classification or new rates of compensation for new 
or existing classes of positions that would become ef- 
fective with the proper approval. All estimates for ap- 
propriations and payments for personal services would 
be made under the title of the class and in accordance 
with the rates of pay applying to the class that the civil- 
service commission or other agency certified as applicable 
to the position in which such services are to be or have 
been rendered. 

With this kind of a system, appropriations for per- 
sonal services may be made in lump sum and the proper 
control over their expenditure would be insured just the 
same as if the appropriations were highly itemized. 
Every position and salary would not then be the subject 
of legislative determination. Besides, the legislative body 
would have a sound and practical working basis for de- 
termining appropriations for personal services. 



174 BUDGET MAKING 

Securing and Retaining an Efficient Personnel 

Equally as important as the problems of organization 
and standardization is the problem of securing and re- 
taining a competent and industrious personnel. There 
should be an employment policy to provide for the scien- 
tific selection and the systematic training of employees, 
the careful measurement of individual efficiency, the ad- 
vancement and promotion of the deserving, the elimina- 
tion of the inefficient, and the retirement of the incapac- 
itated. In order to carry out such a policy the state or 
city government needs a central personnel agency, such 
as a civil-service commission, a department of finance, or 
other general supervising agency. 

An efficient personnel in government service depends 
very largely upon the methods used in its selection. Once 
incompetent employees have got into the service, the most 
carefully planned and administered measures for pro- 
moting efficiency will amount to little. The methods of 
selection should be such as not only to prevent incompe- 
tents from coming into the service, but to secure those 
who have real ability and fitness for the work in ques- 
tion. In filling any position there should be an analysis 
of the duties to be performed ; the qualifications needed 
for the discharge of these duties should be determined; 
and tests that will discover the type of employee desired 
should be established. 

After persons have entered the service there is great 
need for some means of training them for increased use- 
fulness in the service. Many business corporations and 
even a few cities have found training courses of great 
practical value both as a means of increasing efficiency 
and adding to the esprit de corps of their employees. 



BUSINESS STANDAEDS AND METHODS 175 

Such training should be supervised by the civil-service 
commission or some general administrative agency. It 
may very well be supplied by private agencies equipped 
for public-service training. 

A very important consideration in the building up of 
a competent personnel is the determination of individual 
efficiency with a view to rewarding the efficient and elim- 
inating the inefficient. In some kinds of work, such as 
clerical and stenographic work, it is comparatively easy 
to determine the quantity and quality of the employee's 
output, but in other kinds, as advanced scientific re- 
search, it is very difficult to appraise. However, there 
seems to be no way to insure just treatment to the em- 
ployee and a fair return to the government except by the 
establishment of efficiency rating systems. Such systems 
should be very flexible, to begin with, and no attempt 
should be made to apply a single system to the entire 
service. 

Other considerations, as advancements, promotions, 
removals, retirements and pensions are important, and 
should be regulated in accordance with a uniform em- 
ployment policy. Questions relating to these phases of 
employment, as they may enter into budget making, will 
then be comparatively easy to handle. 

What States and Cities Have Already Accomplished 

So far 10 states have established the merit system of 
civil service. 1 The systems are under the control of civil- 
service commissions, usually composed of three members 



i These states and the dates when their systems were adopted are as fol- 
lows: New York (1883), Massachusetts (1884), Wisconsin (1905), Illinois 
(1905), Colorado (1907), New Jersey (1908), California (1913), Con- 
necticut (1913), Ohio (1913), Kansas (1915), and Maryland (1920). In 
1921 Connecticut abolished the system. 



176 BUDGET MAKING 

appointed by the governor for overlapping terms. In 
Maryland, however, the commission is composed of only 
one member appointed by the governor. Under the 
administrative reorganization that took place in Massa- 
chusetts in 1919 and in California in 1921 both these 
states have now what are practically single-headed com- 
missions. For employment management this single- 
headed type of organization is to be preferred to the 
board type. 

State civil-service commissions have concerned them- 
selves mainly with the selection of employees and with 
advancements, promotions, and removals, and have given 
little attention to efficiency ratings and to standardiza- 
tion of employment. While efficiency records are re- 
quired in four of the states, they are not made use of to 
their fullest extent. Efforts have been made in only 
two of the states to put into practice methods of employ- 
ment standardization. 

A few other states have already recognized the need 
for some central control over public employment, but 
were not inclined to accept a system of civil service since 
they regarded such a system as depriving the adminis- 
trative heads of proper and adequate control over their 
subordinates upon whom they must depend for the per- 
formance of the work of the organization unit. Nebraska, 
under her plan of administrative reorganization recently 
adopted, has given the department of finance control over 
employment standardization. The Wyoming state board 
of supplies is given the power to determine the character 
and number of employees in all state departments and 
agencies, to fix, as far as practicable, uniform rates of 
compensation and otherwise regulate the conditions of 
employment. 



BUSINESS STANDARDS AND METHODS 177 

About 180 cities, principally in New York, Ohio, and 
Pennsylvania, have civil-service commissions. These 
commissions are usually composed of three members, 
sometimes four or five members. Their work is prac- 
tically of the same general character as that of the state 
civil-service commissions. Three urban counties also 
have civil-service commissions, namely, Cook (Chicago), 
Los Angeles, and Milwaukee Counties. 

II. Purchasing Methods and Procedure 

The magnitude of the purchasing problem in states and 
cities is indicated by the fact that from 20 to 50 per cent 
of the ordinary current expenditures of these govern- 
ments goes for the purchase of supplies and materials. 
In spite of this comparatively large expenditure for 
various commodities that the state and the city use, it is 
only recently that many of them have become interested 
in the subject of purchasing with a view to introducing 
economy there and have attempted to centralize control 
over buying methods and procedure by fixing responsi- 
bility for all purchasing in a single unit of the govern- 
ment. In the majority of states and cities, using 
agencies still buy their own supplies. As a result they 
frequently spend more than is necessary, sufficient scru- 
tiny cannot be exercised on the part of the government, 
and favoritism is often shown in the award of contracts. 

Advantages of a Centralized Purchasing System 

Numerous savings and certain advantages accrue from 
the operation of a centralized purchasing system. Briefly, 
they are as follows: (1) the concentration of purchasing 
power, permitting goods to be bought in large quantities 
at the lowest and best prices under competitive bidding 



178 BUDGET MAKING 

and promoting prompt delivery, inspection, and payment 
for goods with the minimum inconvenience to dealers; 
(2) the standardization of supplies, eliminating un-' 
necessary range in kinds of goods, also unduly expensive 
grades; and (3) the development of an expert purchas- 
ing staff, acquainted with the details and skilled in the 
methods of the several phases of purchasing, inspecting, 
testing, and storing goods. 

Development of Centralised Purchasing in Cities and 
States, 

The adoption of methods providing for centralized 
purchasing of supplies in governmental organizations is 
comparatively recent. It was scarcely more than twenty 
years ago that cities first began to centralize their pur- 
chasing. They copied to a large extent the purchasing 
methods and procedure of private corporations. Chicago 
was the first large city to establish a purchasing depart- 
ment (1898), which was placed under the direction of a 
"business agent," empowered to control the purchasing 
by the city's agencies. In 1903 Philadelphia established 
a purchasing department with control over the purchase 
of all supplies for "the conduct of the business of the 
city." It has been since 1910 that most of the larger 
cities have established centralized purchasing systems. 
Among these may be mentioned Cleveland, Toledo, 
Akron, Dayton, St. Louis, Minneapolis, Los Angeles, 
Cincinnati, Detroit, Atlanta, New York, Baltimore, and 
Milwaukee. There are now about four score cities 
throughout the country that have centralized purchasing 
of most of the supplies and materials they use. Edu- 
cational supplies are usually omitted from the general 
purchasing control. 



BUSINESS STANDARDS AND METHODS 179 

Turning to the states, 2 Texas, as early as 1899, estab- 
lished the office of state purchasing agent for the several 
eleemosynary institutions of the state. This office oper- 
ated continuously until 1919, when it was abolished and 
the exercise of its functions was given to the newly 
created state board of control. The next state to create 
the office of purchasing agent was Vermont, in 1912. The 
Vermont agent was given the power to purchase all sup- 
plies and materials used by the several departments and 
institutions of the state. New Hampshire followed in 
1913 by creating the office of purchasing agent, the agent 
having charge of the purchasing for all departments and 
institutions except the state agricultural college. Al- 
though several changes have since been made in the 
powers of the purchasing agent, they have resulted in 
an increase rather than a decrease of his authority. 
California established a state purchasing department in 
1915, which had control over the purchase of supplies for 
all state agencies, except the state university. In 1921 
this department was abolished and its powers trans- 
ferred to the division of purchases and custody under 
the newly created department of finance headed by the 
state board of control. Alabama, in 1915, constituted the 
secretary to the governor purchasing agent for the state. 
He remained so until 1919 when his purchasing func- 
tions were given to the newly created board of control 
and economy. In 1916 New Jersey established the office 
of state purchasing agent under the control of the state 
house commission. Ohio, in 1917, established a sta*te 
purchasing department in the secretary of state's office, 
having authority to purchase for the state offices and 

( 2 See A. E. Buck, "The Coming of Centralized Purchasing in State Gov- 
ernments," Supplement to National Municipal Review for February, 1920. 



180 BUDGET MAKING 

departments, but not for the institutions, the courts, and 
certain boards. In 1921 the functions of this department 
were transferred to the newly created department of 
finance and placed under the direction of the superin- 
tendent of purchases and printing. The purchasing 
powers were extended to apply to nearly all institutions. 
The Illinois civil administrative code of 1917 provided 
for the establishment of a division of purchases and sup- 
plies in the department of public works and buildings, 
which is authorized to purchase practically all of the 
state's supplies. The New York legislature of 1918 
created a central supply committee, consisting of seven 
ex officio members. It began to operate July 1, 1919. In 
1921, however, the purchasing work of this committee 
was transferred to the board of estimate and control. 
In 1919 Idaho, Michigan, Nebraska, and Wyoming pro- 
vided for centralized purchasing of state supplies. Idaho 
placed the purchasing functions under the department of 
public works in its reorganized administration. Michi- 
gan created the office of state purchasing agent, but 
later (1921) the powers of this office were transferred 
to the state board of administration, consisting of seven 
ex officio members. Nebraska provided for the purchase 
of supplies by the department of finance. Wyoming 
created a state board of supplies, consisting of three 
ex officio members. In 1920 Maryland established a cen- 
tral purchasing bureau under the control of a purchasing 
agent appointed by the governor, which purchases 
all supplies for the various state agencies. The bureau 
is placed under the control of a commission of 20 ex 
officio members. In 1921 Utah created a department of 
finance and purchase under a director appointed by the 
governor. This department has control over the pur- 



BUSINESS STANDARDS AND METHODS 181 

chases of all state agencies. Washington, in the admin- 
istrative code (1921), established a division of purchase 
in the department of business control with a supervisor 
in charge appointed by the head of the department. This 
division buys supplies for practically all the state de- 
partments, institutions, and other agencies. Several 
other states, for example, Massachusetts, Virginia, and 
Wisconsin, have attempted to establish control over the 
purchase of supplies and materials for their various 
using agencies, but have not been able to centralize the 
purchasing to any considerable extent. A large number 
of states have placed their charitable, penal, and correc- 
tional institutions under the supervision of boards of 
control and these boards, in several instances, have con- 
solidated the purchasing for their institutions. 

Types of Organization in Purchasing Agencies 

Three general types of organization for purchasing 
agencies have been developed in states and cities. These 
are in the order of their efficiency as follows: (1) divi- 
sion of a department under a centralized administration ; 
(2) independent department or bureau headed by a 
single responsible officer; and (3) a board of appointive 
or ex officio members with purchasing powers. 

The purchasing systems of Cleveland, Toledo, Dayton, 
and Akron are examples among the cities of the first 
type. In these cities, the purchasing is under the depart- 
ment of finance. Among the states, the purchasing sys- 
tems of Illinois, Idaho, Nebraska, Ohio, and Washington 
are examples of the first type. In Illinois and Idaho 
purchasing is under the department of public works; in 
Nebraska and Ohio it is under the department of finance ; 
and in Washington it is under the department of business 



182 BUDGET MAKING 

control. With this type of organization responsibility 
for the purchasing is definitely fixed and full cooperation 
with other departments under the consolidated admin- 
istration is assured. 

Examples of the second type of purchasing organiza- 
tion are those of Philadelphia, Minneapolis, Chicago, 
Los Angeles, Detroit, and Atlanta. In these cities, the 
purchasing department is under the control of a single 
officer responsible to the mayor. The purchasing agen- 
cies of Maryland, New Hampshire, New Jersey, and 
Vermont belong to this type. In these states, responsi- 
bility for purchasing is largely fixed in a single officer, 
called the purchasing agent, who is appointed by the 
governor, and the purchasing department or office is 
practically independent of the other state departments 
and agencies. This seems to be the form of organization 
for efficient purchasing work best adapted to those states 
and cities that have not reorganized and consolidated 
their administrations. In Vermont the purchasing agent 
is under the supervision of the state board of control; 
in New Jersey he is under the state house commission; 
and in Maryland he is under a board of 20 ex officio 
members. 

The third type of purchasing organization is illus- 
trated by the purchasing agencies of New York, Balti- 
more, and Milwaukee, among the cities, and of New 
York, Michigan, and Wyoming, among the states. In 
these cities and states the authority to purchase is vested 
in boards composed of city or state officers serving in 
an ex officio capacity. The members of such boards are 
charged with numerous other duties and, therefore, have 
very little time to give to the purchasing work. This 
work, if it is to be performed, must be delegated to some 



BUSINESS STANDARDS AND METHODS 183 

person or group of persons, in which case responsibility 
for the results accomplished cannot be fixed. In Ala- 
bama and Texas, which also belong to this type, the pur- 
chasing is in the hands of the state board of control. 
The board of control is an attempt to consolidate the 
administration, especially of state institutions, looking 
toward more efficient management. However, it at once 
introduces board government, which for purely admin- 
istrative purposes is regarded as inefficient, unbusiness- 
like, and irresponsible. But putting aside these objec- 
tions, a board of control, burdened with fiscal, adminis- 
trative, managerial, and quasi-legislative duties, can 
hardly be expected to initiate and carry out an effective 
system of purchasing. 

Methods and Procedure of Centralized Purchasing 
Agencies 

All state and city purchasing agencies make up sched- 
ules of supplies from requisitions or estimates furnished 
by the using agencies, but not all of them attempt to 
standardize the supplies used. The development of 
standard specifications for the goods to be purchased 
needs to be emphasized more than it has been in con- 
nection with state and city purchasing. Standardization 
leads to economy in buying and is of great assistance in 
budget making. 

Purchasing agencies secure bids by employing one or 
all of three methods of advertising, namely, advertising 
in newspapers, posting schedules on bulletins, and mail- 
ing schedules directly to dealers. In most cases only 
sealed bids are received and must be accompanied by 
certified checks to insure good faith. Awards are made 
to the lowest responsible bidder, and usually preference 



184 BUDGET MAKING 

is given to local dealers or home products. Contracts 
are usually entered into for periods of three, six, or 
12 months and bonds are required to guarantee their 
performance. 

Practically all of the purchasing agencies order the 
goods to be delivered directly to the using agencies. 
Where goods are shipped directly to the using agencies, 
the important function of inspecting and testing goods 
is usually left to the storekeepers and stewards of the 
using agencies, who do not have the training or equip- 
ment for the effective performance of this work. 
Standard specifications avail little unless there are 
thorough inspections and tests of all goods received. 

Several state and city purchasing agencies are very 
slow about making payment for goods, and hence do not 
take advantage of discounts. Eevolving funds have been 
provided for several of the state purchasing agencies, 
thus enabling the agencies not only to make quick pay- 
ments but to purchase goods out of season and store them 
for future consumption. 

Centralised Purchasing and the Budget 

If properly managed, there is no doubt that a cen- 
tralized purchasing system for state and city using 
agencies will prove more efficient and more economical 
than the old method of each agency buying its own sup- 
plies. This statement is borne out by the fact that none 
of the states or cities that have adopted a system of 
centralized purchasing have discontinued it, or desired 
at any time to return to former methods. 

Aside from the question of economy, centralized pur- 
chasing has a very definite and close relation to budget 
making. The standard specifications used by the pur- 



BUSINESS STANDARDS AND METHODS 185 

chasing agency should be followed closely in the prepa- 
ration of the estimates. The organization units should 
consult with the purchasing agent regarding the probable 
trend of prices for the coming year or two years before 
making up their estimates. The budget-making authority 
and its staff should make use of the purchasing office 
data relative to the trend of prices, expenditures for 
various classes of goods, and the prospective needs of 
the several state agencies in the preparation of the 
budget. 

III. Accounting Methods and Control 

The accounting methods of state governments, as a 
rule, are considerably less advanced than those of pri- 
vate corporations and municipalities. In fact, in some 
states the now almost primitive methods of half a cen- 
tury ago are still being used. Little or no attention is 
given to the classification of expenditures and revenues, 
hence information that can be easily analyzed for budget- 
making purposes is not developed. In most states the 
handling of state finances is assigned to a number of 
different officers and boards acting more or less inde- 
pendently of each other. The only fiscal officers uni- 
formly found in the states are the treasurer and the 
auditor, or comptroller, provided for by the constitu- 
tion, selected usually by the people, and frequently hav- 
ing no special training or qualifications to fit them for 
the performance of their duties. In a number of the 
states wherein the revenues are collected mainly by local 
officers and transmitted to the state treasury, there is 
no effective state administrative supervision over the 
accounts of these local officers. There are still states in 
which revenues, such as fees, are collected by state 



186 BUDGET MAKING 

officers and are not turned into the state treasury, no 
general account being taken of them or of the expendi- 
tures made from such revenues. Budgetary procedure, 
to be effective, calls for complete accounting records and 
control over all the revenues and expenditures of the 
government. 

The problem of establishing proper accounting pro- 
cedure for handling the expenditures and revenues of 
state and city governments divides itself into two phases: 
one is the administrative accounting and the other is 
the independent audit. The two are not to be confused; 
the accounting must be done by those who are held ac- 
countable for the administration or the carrying out of 
the budget. It involves much more than simply keeping 
within or recording charges against appropriations. 
There are several records, such as cost accounts and 
operation accounts, which the administration needs for 
purposes of information and which the responsible of- 
ficer must have as a means of keeping in touch with what 
is being done, but which have no relation to the question 
of "authority" to spend. The independent audit in- 
volves a careful review of all administrative acts by a 
non-administrative agency. 

Administrative Accounting 

In several states and not a few cities the administra- 
tive accounting is done by the elective auditor, or comp- 
troller. For example, in New York the comptroller, 
whose chief business it is to audit the expenditures and 
revenues of the state, keeps practically all of the ac- 
counts of the administration. Thus the officer who is 
intended to act as an independent check upon the admin- 
istration keeps the administration's books and records 



BUSINESS STANDARDS AND METHODS 187 

and in turn audits them as the means of control over the 
administration. 

In the reorganization of the Illinois administration 
the question of administrative accounting, record keep- 
ing, and control over expenditures was vested in the 
newly created department of finance (see Chapter II). 
This was the first time that a department had been de- 
veloped in connection with state governmental organi- 
zation to act as a specialized central office of accounting 
and executive control. This department has prescribed 
and installed a uniform system of bookkeeping, account- 
ing, and reporting in the state departments. Standard 
account titles have been set up that are used not only as 
a means of controlling expenditures but as a basis for 
budget estimates and appropriations as well (see Chap- 
ter IV). After the appropriations have been made and 
before the beginning of the fiscal year to which they 
apply, the department of finance requires each division 
of the various departments to allocate to the 12 months 
of the fiscal year its appropriations for operating ex- 
penses covering seven of the standard accounts, namely, 
salaries and wages, office expense, traveling expense, 
operating supplies and expense, working capital, school 
supplies, and repairs. Controlling accounts are then set 
up on this basis in the office of the director of finance. 
Appropriations for what are termed the capital outlay 
accounts, that is, for equipment, buildings, and land, are 
allocated not to months of the fiscal year but to projects 
to be undertaken. Monthly reports are required from 
each departmental division showing the expenditures 
made from each of the 10 standard accounts during the 
month, the bills that have not been paid, the contracts and 
orders outstanding, the total encumbrance, and the fre3 



188 BUDGET MAKING 

available balance of appropriation. A controlling ledger 
is kept in the department of finance which shows the 
percentage of expenditures of the seven operating 
accounts compared with the allotments and with the 
appropriations under each standard account for each 
departmental division. This controlling ledger, together 
with the monthly reports, shows the exact financial con- 
dition of each division of government. All vouchers and 
bills must pass through the department of finance for 
audit and approval by the administrative auditor before 
going to the auditor of public accounts for payment. 
This constitutes the administration's check on the expen- 
ditures that are made by the departments. To supply 
the administration with information as to how efficiently 
the work of the government is conducted, the department 
of finance requires cost acccounts to be kept by the insti- 
tutions and departments. 

Nebraska, Ohio, Utah, and Missouri (subject to ap- 
proval by referendum in 1922) have practically copied 
the Illinois department of finance. In these states the 
departments of finance exercise almost the same powers 
with reference to accounting control as does that of Illi- 
nois (see Chapter II). 

Independent Audit 

Forty-two states have officers designated as comp- 
trollers or auditors, who are elected by the people in all 
states except three, namely, New Jersey, Tennessee, and 
Virginia, where they are chosen by the legislature. In 
the remaining six states the auditing is performed either 
by some officer, as the secretary of state acting in an 
ex officio capacity, or by an officer or examiner appointed 
by the governor. In a majority of the cities the auditor, 



BUSINESS STANDARDS AND METHODS 189 

or comptroller, is elected by the people or appointed by 
the legislative body. 

The first requirement for an independent audit is that 
the officer performing this function shall be free of the 
administration. That is, he should be either appointed 
by the legislative body or elected by the people. From 
the standpoint of proper control under the executive 
type of budget system appointment of this officer by the 
legislative body is preferable to his election by the peo- 
ple. For where the executive proposes the budget plan 
and the legislature authorizes the plan to be carried out, 
the legislature should have a representative to see that 
the plan is carried out by the executive in accordance 
with its authorizations, to check the collection and ex- 
penditure of money, and to act as a critic of the admin- 
istration's methods. 

The second requirement for an independent audit is 
that the officer performing this function shall not have 
any other duties than those strictly belonging to the 
office. In several states the comptroller, or auditor, has 
been required to accrue revenue, to collect such revenues, 
and to audit and verify his own accruals and collections. 
Oftentimes this officer serves in an ex officio capacity on 
various administrative boards. Yet he is expected to 
check up and enforce administrative responsibility while 
himself laboring under the administrative duties, the 
effect of which is to destroy the disinterestedness of his 
audit. Obviously, the officer who performs the functions 
of the independent audit should not serve in the dual 
capacity both of auditor and administrative officer. The 
auditing functions should be completely separated from 
the functions of planning and spending if there is to be 
effective check and criticism. 



190 BUDGET MAKING 

In the smaller states and cities a periodic audit 
ought to be sufficient. Then it would not be necessary 
to incur the expenses of a permanent auditing office, since 
the work could be done once or twice a year by a firm of 
accountants hired for that purpose by the legislative 
body. In this case all controlling accounts would be kept 
by the chief financial officer of the administration. 



CHAPTER XII 
ADMINISTRATIVE ORGANIZATION AND THE BUDGET 

The success of the budget system depends largely upon 
good administration, a very important factor of which 
is proper administrative organization or machinery. It 
has been said that "able men can administer bad ma- 
chinery to secure good results, whereas inefficient men 
will achieve poor results with the best of machinery." 
Certainly, in the conduct of government, the trained indi- 
vidual is a very important element, but not everything. 
The governmental machine is also an important element 
in doing work. It is a waste of public money to set a 
body of trained specialists operating a governmental 
organization that is in a class with the treadmill. The 
ability of experienced administrators may be spent in 
vain on an obsolete and ramshackle administrative ma- 
chine. Furthermore, such a machine does not attract 
able men to operate it; they prefer to stay in private 
business rather than fritter away their time and energy 
trying to get the maximum service at the minimum run- 
ning cost out of a machine that Topsy-like, " jist growed," 
or was not built for efficiency. 

How the Present State Administrative Organization 
Developed 

In the early days of our state governments the admin- 
istrative officers, including the governor, were appointed 

191 



192 BUDGET MAKING 

by the legislature. This was due largely to the popular 
distrust of the executive in those days. Later the people 
began to distrust the legislature, and then the governor 
and the administrative officers were chosen by the ballot. 
Shortly after the middle of the past century social and 
economic changes began to multiply the number of state 
administrative officers, but the people continued to elect 
them on the theory that popular control could best be 
secured by establishing as many elective offices as pos- 
sible. The state constitutions that were written or re- 
vised directly after the Civil War made provisions for a 
number of administrative officers and provided, in most 
cases, that they be chosen by the people. These provi- 
sions were copied by subsequent constitutions and are in 
force in all the states at the present time. During the 
last two decades the administrative activities of state 
governments have rapidly expanded and the legislatures 
have created numerous agencies, offices, boards, and com- 
missions, to perform these activities. No studied plan 
of administrative organization was followed in any state. 
In most cases, every time a new activity was established, 
a new agency was created to carry it on. There was no 
consistent scheme by which the officers or members of 
these agencies were chosen; some were elected, some 
appointed by the governor, some chosen by the legisla- 
ture, some appointed by the governor and the senate, 
some appointed by other officials, and some served ex 
officio. No attempt was made to departmentalize the 
work of the government. The result has been the de- 
velopment of a cumbersome and ill-adjusted govern- 
mental machine, which prevents the governor from 
establishing effective control over even the appointive 
officials. 



ADMINISTRATIVE ORGANIZATION 193 

Condition of Administrative Organisation in Most States 

The administrative organization of Virginia may be 
taken as a typical example of the condition that exists 
in practically all the states that have not recently taken 
steps to reorganize their administrations. In Virginia 
the governor is elected by the people for a term of four 
years. The lientenant-governor, the secretary of state, 
the treasurer, the attorney general,- the superintendent 
of public instruction, and the commissioner of agricul- 
ture are also elected for terms equal to that of the gov- 
ernor. Since they derive their authority from the same 
source, the people, they are practically coordinate in 
power with the governor. The auditor of public accounts 
is elected by a joint vote of the two houses of the legis- 
lature for a term of four years. A commissioner of state 
hospitals is appointed by the governor with the approval 
of the senate. Then there is the state board of educa- 
tion, composed of the governor, the attorney general, the 
superintendent of public instruction, and three members 
selected by the senate every four years; the board of 
agriculture and immigration, consisting of one member 
from each Congressional district appointed by the gov- 
ernor with the senate's approval for four years, and the 
president of the Virginia Polytechnic Institute ex officio; 
the state corporation commission, composed of three 
members elected by the people for overlapping terms of 
six years each; the board of directors of the state peni- 
tentiary, etc., consisting of five members appointed by 
the governor with the senate's approval for overlapping 
terms of five years each; a board of directors for each 
state hospital made up of three members appointed by 
the governor with the approval of the senate for over- 



194 BUDGET MAKING 

lapping terms of six years; and a general board of di- 
rectors composed of all the hospital boards of directors, 
which appoints a superintendent for each hospital. All 
of the foregoing officers and boards are provided for in 
the state constitution. Besides these there are almost 
one hundred statutory offices, boards, commissions, de- 
partments, bureaus, and other agencies. The controlling 
officers of these agencies are in only a few cases wholly 
responsible to the governor either for their appointment 
to office or for the conduct of their work. The governor 
exercises only a very limited power of removal over 
administrative officers. Not only are the administrative 
agencies widely scattered, but the main functions of gov- 
ernment are not coordinated. There is much duplication 
of effort and overlapping of work. 

Virginia and a number of states with the same sort 
of chaotic administrative organization have adopted the 
executive type of budget system. Such organization, or 
rather lack of organization, presents serious difficulties 
in carrying out the principle of the executive budget, that 
is, the idea of making the governor fully responsible for 
preparing the budget plan and likewise for executing 
that plan. In attempting to overcome these difficulties 
some states, of which Maryland is a good example, have 
provided that the governor shall have the power to com- 
pel all spending agencies to furnish him with such infor- 
mation as he may need in preparing the budget, and that 
the legislature shall not have the power to increase the 
governor's budget. Any provisions that the legislature 
wishes to make for expenditures not provided for in the 
governor's budget must be made under a special pro- 
cedure after having disposed of the executive 's financial 
program. But a very essential part of budgetary pro- 



ADMINISTRATIVE ORGANIZATION 195 

cedure is systematic control over the expenditures after 
they have been authorized. These provisions, however, 
do not place the governor in any better position than be- 
fore for effectively managing the administration in car- 
rying out his budget plan. Because of numerous inde- 
pendent administrative officers and agencies, the gov- 
ernor cannot exercise adequate control over the adminis- 
tration. For this reason, public officials are beginning to 
realize that the main problem is one of governmental re- 
organization if the budget system, particularly the execu- 
tive type of budget system, is to work effectively. 

Recent Movement for Reorganization of Administration 

The recent movement for the reorganization of state 
administration has been in two directions. One is toward 
a decentralized administration; the work of the admin- 
istration is departmentalized, but each department is 
under the control of an independent board or commis- 
sion and is directly administered by a trained secretary 
and staff. The other is toward a centralized adminis- 
tration; the various activities of the administration are 
departmentalized and integrated by making the heads of 
the departments appointive by the governor and respon- 
sible to him. To do the work of administration the first 
plan provides staffs of specialists under boards of lay- 
men, the members of which boards are appointed for 
long and overlapping terms, while the second plan pro- 
vides administrators selected by and under the control 
of a responsible chief executive. 

The Plan of Decentralized Administration 

Wisconsin furnishes the best example of decentralized 
administration. In fact, New Jersey is the only other 



196 BUDGET MAKING 

state that has attempted to any extent administrative 
reorganization in the direction of decentralization, and 
as yet a consistent plan has not been developed in this 
state. In Wisconsin the activities of the administration 
are fairly well departmentalized by bringing together and 
combining the functions of small agencies doing similar 
kinds of work. The consolidated departments, or admin- 
istrative units, are placed under the control of boards or 
commissions, the members of which are appointed for 
long and overlapping terms. These boards or commis- 
sions employ trained secretaries and expert staff assist- 
ants to do the actual work of administration. In this 
way the administrative units are independent of each 
other, and there is no one responsible for the administra- 
tion of the state government as a whole. Under this ar- 
rangement the board or commission acts largely as an 
agent of contact between the expert staff and the public. 
This method of conducting the administrative work, it is 
claimed, insures continuity of policy and removes the ad- 
ministration from the influence of bad politics, and, it 
might be added, that it likewise removes it from the in- 
fluence of good politics. The actual heads of the admin- 
istration are securely removed from popular control. Be- 
sides, they are protected from executive and legislative 
wrath by a system of continuing appropriations, which 
has been discussed in Chapter IX. This seems to be a 
very 'good arrangement for securing efficient results if the 
people do not care for centralized and responsible leader- 
ship in government and are ready and willing to trust 
the work of administration to an aristocracy of the "in- 
telligentzia ' \ over which they have little or no control. 

Under such an administrative organization the budget- 
making authority must necessarily be a board. The Wis- 



ADMINISTRATIVE ORGANIZATION 197 

consin state board of public affairs, which performs this 
function, is a sort of super-board, consisting of both ad- 
ministrative and legislative officers. 

The Plan of Centralized Administration 

Centralized administration aims at bringing about sim- 
ple, direct, responsible government. It proposes the re- 
organization of the several offices, boards, commissions, 
and agencies concerned with the administration of the 
state's affairs into a few coordinate departments with 
heads appointed by the governor and responsible to him. 
In this way the entire administration is integrated, use- 
less and obsolete offices and agencies are abolished, and 
closely related functions are placed under the manage- 
ment of a single department. Responsibility for the ad- 
ministration is centered in the governor, who is the chief 
executive officer elected by the people of the whole state. 

During the last two decades our city governments have 
been reorganizing in the direction of centralized admin- 
istration, and recently the city-manager plan has given 
considerable impetus to this movement. Up to the pres- 
ent time above four hundred cities have adopted the com- 
mission form of government, the essential feature of 
which, from the standpoint of administrative organiza- 
tion, is the grouping of all offices and agencies of the city 
under a few departments, usually five, each under the 
control of a single commissioner elected by the people. 
Out of the commission form of city government has 
evolved the city-manager plan under which the commis- 
sion becomes mainly a legislative body and chooses the 
manager, who exercises supervisory control over the 
whole city administration organized into a few depart- 
ments. More than two hundred and fifty cities have al- 



198 BUDGET MAKING 

ready adopted the city-manager form of government. 
Recently a large number of cities have adopted the cen- 
tralized-mayor form of government in which the city 
administration is organized under the mayor similar to 
the organization under the city manager, but differing 
from the manager form of government mainly in that the 
mayor is elected by the people rather than chosen by the 
city council. 

The movement for centralization of state administra- 
tion actually started in Oregon about 10 years ago, when 
an unsuccessful attempt was made to reorganize the state 
government. Two or three years later studies were con- 
ducted in both Minnesota and Iowa, which proposed to 
arrange the administrative activities under a few depart- 
ments with heads appointed by and responsible to the 
governor. These plans failed to receive any serious con- 
sideration. The New York constitutional convention of 
1915 proposed a plan for centralizing the administra- 
tion of the state, but it was lost in the defeat of the pro- 
posed constitution. About this time a committee made 
a thorough study of the Illinois administration and rec- 
ommended that it be departmentalized and centralized 
under the governor, as far as could be done without con- 
stitutional change. In 1917 a plan for reorganizing and 
centralizing the statutory administrative agencies was 
adopted by the Illinois legislature. This was the first 
plan of its kind to be adopted in this country, and because 
of its simple arrangement and consistent scheme of or- 
ganization it is about the best example of centralized 
state administration. In 1919 two other states, Idaho 
and Nebraska, practically copied the Illinois plan. In 
1918 Massachusetts provided by constitutional amend- 
ment for the consolidation of its numerous administra- 



ADMINISTRATIVE ORGANIZATION 199 

tive offices and agencies into 20 departments. The re- 
organization was effected by statute the following year. 
The plan adopted is not so simple and consistent as the 
Illinois plan, and executive responsibility is not de- 
veloped to the same degree that it is in Illinois. In 1921 
Ohio and Washington adopted statutory reorganization 
plans similar to that of Illinois. California also enacted 
an administrative consolidation plan in a series of nine 
bills, which does not provide for as thorough a reorgan- 
ization as in the case of the other two states. The move- 
ment is spreading rapidly, as indicated by the fact that 
very recently plans for administrative reorganization 
and centralization have been proposed in Arizona, Con- 
necticut, Delaware, Michigan, Missouri, New Mexico, New 
York, Oregon, and Tennessee, and studies of the admin- 
istration are under way in Arkansas, Connecticut, Mary- 
land, and Texas. 1 

A brief description of the Illinois plan, as perhaps our 
best example up to the present time of centralized state 
administration, should be of interest in this connection. 2 
The Illinois civil administrative code abolished more than 
100 statutory administrative offices, departments, boards, 
commissions, and agencies and consolidated their func- 
tions under nine departments, namely, finance, agricul- 
ture, labor, mines and minerals, public works and build- 
ings, public welfare, public health, trade and commerce, 
and registration and education. The reorganization was 
made on the basis of general functions, and the number 



i See F. A. Cleveland and A. E. Buck, The Budget and Responsible Gov- 
ernment, New York, 1920, Part II. Also see A. E. Buck, "Administrative 
Consolidation in State Governments," Supplement to National Municipal 
Review for November, 1919. 

2 See J. M. Matthews, "Administrative Reorganization in Illinois," Sup- 
plement to National Municipal Review for November, 1920. Tells of the 
operation of the reorganized Illinois government. 



200 BUDGET MAKING 

of departments was reduced to the minimum consistent 
with the broad lines of functional grouping. Each de- 
partment has a single head, called a director, appointed 
by the governor with the approval of the senate for a 
term equal to that of the governor (four years). This 
recognizes an individual as preferable to a board for 
purely administrative work; responsibility is thus fixed 
for the work of each department. General administrative 
responsibility is centered in the governor since his sub- 
ordinate officers are not given a longer term of office than 
himself. The approval of the governor's appointments 
by the senate may be objected to on the ground that it 
tends to divide responsibility, but this objection is met 
by the argument that it insures better selection of de- 
partment heads by the governor. The directors receive 
annual salaries varying from $5,000 to $7,000. Some of 
them are required to have special technical training or 
professional qualifications; and the method of their se- 
lection tends to insure the choice of trained men. There 
are more than 40 subordinate officers with salaries rang- 
ing from $3,000 to $5,000, who are appointed in the same 
manner as the directors and are placed under the control 
of the heads of the departments. Perhaps it would be 
better if the subordinate officers were chosen by the di- 
rectors, as is provided in the Ohio plan. The department 
employees are appointed subject to the civil-service regu- 
lations of the state. 

The Illinois plan recognizes the need for boards to dis- 
charge quasi-legislative or quasi- judicial functions and to 
act in an advisory capacity. Wherever quasi-legislative 
or quasi-judicial functions are included in the work of the 
nine departments, boards have been provided to perform 
such functions. These boards are attached to such de- 



ADMINISTRATIVE ORGANIZATION 201 

partments as labor, mines and minerals, and trade and 
commerce. The members of these boards are appointed 
by the governor with the approval of the senate and most 
of them receive salaries, the maximum annual salary be- 
ing $7,000. While these boards are component parts of 
the departments to which they belong, they nevertheless 
act as independent entities in the performance of their 
duties. In determining questions of policy advisory or 
non-executive boards have been provided to advise with 
the department heads and the governor. These boards 
are associated with such departments as agriculture, pub- 
lic works, public welfare, public health, and education 
and registration. The members of these boards are ap- 
pointed in the same manner as the department heads and 
receive no compensation. They are usually required to 
have had some experience in the general work of the de- 
partments to which they are attached. 

The net result in Illinois, Idaho, Nebraska, Ohio, and 
Washington is that the administration, with the excep- 
tion of certain constitutional offices and a few minor 
agencies, is now centralized under the governor. But it 
is impossible to establish fully the principle of executive 
responsibility so long as there are certain independent 
elective administrative officers provided for by the con- 
stitution. Complete centralization demands constitu- 
tional revision. The Illinois, Idaho, Nebraska, and Ohio 
plans are, however, in the direction of making possible 
the effective operation of an executive budget system. 
Under these plans the governor prepares the budget for 
the legislature with the aid of a permanent staff agency. 
After the budget has been authorized by the legislature, 
the governor has the power through the general control 
vested in the department of finance and by reason of the 



202 BUDGET MAKING 

greater authority he exercises over the administration 
because of centralization to enforce, in a large measure, 
the proper execution of the budget. 

Further Change Necessary to Bring about Responsible 
State Government 

Municipal government, which for many years exhibited 
the same administrative disorganization that still charac- 
terizes state government, has been to a large extent ef- 
fectively reorganized and simplified under the central- 
ized-mayor, the city-manager and the commission forms 
of government. In the centralized-mayor and the city- 
manager forms, executive responsibility is definitely fixed 
and executive control is fully established. In state gov- 
ernment, as has been indicated in the preceding para- 
graph, considerable remains to be done in order to de- 
velop a responsible administrative organization. Some 
rather drastic changes must be made in state constitu- 
tions. 

Not long ago, the National Municipal League ap- 
pointed a committee on state government to draft a 
model state constitution that would set up a responsible 
executive organization and simplify generally the ma- 
chinery of state government. After a number of com- 
mittee conferences and considerable general discussion 
at two of the League's annual meetings, provisions have 
been drafted and tentatively adopted covering the es- 
sentials of legislative and executive organization and the 
budget. 3 These provisions are briefly summarized in the 
following paragraph. 

A single-house legislature is constituted, the members 

s See Appendix II for parts of the model state constitution dealing with 
the legislature the executive, and the budget. 



ADMINISTRATIVE ORGANIZATION 203 

of which are to be chosen by proportional representa- 
tion for two-year terms. The legislature is to hold regu- 
lar sessions each year or at least every two years. A 
legislative council, consisting of the governor and seven 
members of the legislature chosen by that body, is to 
meet continuously. It is to gather information about 
the government, consider proposed legislation, draft bills 
for submission to the legislature, and supplement exist- 
ing legislation by means of ordinances. An auditor is to 
be appointed by the legislature. Executive power is to 
be vested solely in the governor, who is to be elected by 
the people for a term of four years. There is to be no 
lieutenant-governor, or other elective administrative of- 
ficers. The administration is to be organized into a few 
departments the heads of which are to be appointed and 
removed at will by the governor. The governor and the 
department heads are to have seats in the legislature with 
the power to introduce bills and to take part in discus- 
sions, but not to vote. The governor is to submit to each 
regular session of the legislature a budget and at the 
same time introduce all bills necessary to carry out the 
budget plan. Open sessions on the budget are to be held 
by the legislature. The governor is to have the power to 
veto bills or to disapprove or reduce items in appropria- 
tions, subject to a two-thirds vote of the legislature. In 
order to avoid deadlocks between the governor and the 
legislature, there is to be a referendum to the people 
on bills vetoed by the governor, and (by order of the gov- 
ernor) on bills that failed to pass the legislature, if at 
least one-third of the members voted in their favor. 



APPENDIX I 

CITATIONS OF BUDGET LAWS AND AMENDMENTS OF STATES 

1. Alabama, L. 1919, nos. 31 and 130. 

2. Arizona, L. 1919, c. 61. 

3. Arkansas, L. 1913, c. 44. 

4. California, L. 1911, c. 349 amended by L. 1921, S. B. 
no. 876. 

5. Colorado, L. 1919, c. 12. 

6. Connecticut, L. 1915, c. 302 amended by L. 1919, c. 290 
and c. 291. 

7. Delaware, L. 1921, c. 26. 

8. Florida, L. 1921, H. B. no. 69. 

9. Georgia, L. 1918, no. 327, p. 155. 

10. Idaho, L. 1919, c. 135 amended L. 1921, c. 69. 

11. Illinois, L. 1917, civil admin, code, p. 2. 

12. Indiana, L. 1921, c. 149. 

13. Iowa, L. 1915, code sees. 191a-191b 

14. Kansas, L. 1917, c. 312. 

15. Kentucky, L. 1918, c. 12. 

16. Louisiana, L. 1916, no. 140. 

17. Maine, L. 1919, c. 102. 

18. Maryland, Amend. Art. Ill, sec. 52 of Constitution, 1916. 

19. Massachusetts, Amend, no. 16, Const, 1918 supplemented 
by L. 1918, c. 244 and L. 1919, c. 52. . 

20. Michigan, L. 1919, no. 98 amended by L. 1921, no. 2. 

21. Minnesota, L. 1915, c. 356. 

22. Mississippi, L. 1918, c. 225. 

23. Missouri, L. 1921, S. B., no. 434 (subject to referendum, 
Nov. 1922). 

24. Montana, L. 1919, e. 205 amended by L. 1921, c. 163. 

25. Nebraska, L. 1921, e. 210, repealing L. 1919, c. 190, Title 
II, art. 2 and L. 1915, e. 229. 

26. Nevada, L. 1921, c. 60, repealing L. 1919, c. 45. 

27. New Hampshire, L. 1919, c. 153. 

28. New Jersey, L. 1916, c. 15. 

29. New Mexico, L. 1919, c. 174, repealing L. 1917, e. 81 and 
c. 114. 

30. New York, L. 1916, c. 130 (Leg. Law, sees, 26-32) amended 
by L. 1921, c. 336. 

205 



206 BUDGET MAKING 

31. North Carolina, L. 1919, c. 38 amended by Ex. Sess. L. 
1920, c. 38 and again amended by L. 1921, c. 196. 

32. North Dakota, L. 1915, c. 61. 

33. Ohio, L. 1921, admin, code, H. B. no. 294, repealing L. 
1913, S. B. no. 127. 

34. Oklahoma, L. 1919, c. 142. 

35. Oregon, L. 1921, c. 22, repealing L. 1913, c. 284. 

36. Pennsylvania (no provisions). 

37. Khode Island (no provisions). 

38. South Carolina, L. 1919, no. 130. 

39. South Dakota, L. 1917, c. 354 amended by L. 1919, c. 319 
and again by L. 1921, c. 374. 

40. Tennessee, L. 1917, c. 139. 

41. Texas L. 1919 c. 167. 

42. Utah, L. 1917, 'c. 15 amended by L. 1921, c. 127. 

43. Vermont, L. 1915, no. 26 amended by L. 1917, no. 32 and 
L. 1919, no. 22. 

44. Virginia, L. 1918, c. 64. 

45. "Washington, L. 1915, c. 126 amended by L. 1921, c. 7, 
admin, code, sec. 6. 

46. West Virginia, Amend. Art. VI, sec. 51 of Const., 1918. 

47. Wisconsin, L. 1913, c. 728 amended by L. 1915, c. 606, 
and L. 1917, c. 2 and c. 300. 

48. Wyoming, L. 1919, c. 10. 



APPENDIX II 

SECTIONS OF MODEL STATE CONSTITUTION OF THE NATIONAL MUNICIPAL 

LEAGUE RELATING TO THE LEGISLATURE, THE EXECUTIVE, 

AND THE BUDGET 1 

The Legislature 

Section 1. There shall be a Legislature of members who 

shall be chosen for a term of two years by the system of pro- 
portional representation, with the single transferable vote. For 
the purpose of electing members of the Legislature the state shall 
be divided into districts composed of contiguous and compact 
territory from which members shall be chosen in proportion to 
the population thereof, but no district shall be assigned less than 
five members. 

Section 2. Until otherwise provided by law, members of the 
Legislature shall be elected from the following districts: The 
first district shall consist of the counties of and and 

shall be entitled to members. (The description of all the 

districts from which the first Legislature will be elected should 
be inserted in similar language.) At its first session following 
each decennial Federal census the Legislature shall redistrict 
the state and reapportion the members in accordance with the 
provisions of Section 1 of this constitution. 

Section 3. The election of members of the Legislature shall 
be held on the Tuesday next following the first Monday of No- 
vember in the year one thousand nine hundred and twenty-two 
and every second year thereafter. 

Section 4. Any elector of the state shall be eligible to the 
Legislature. 

Section 5. The term of members of the Legislature shall 
begin on the first day of December next following their election. 
Whenever a vacancy shall occur in the Legislature, the governor 
shall issue a writ of appointment for the unexpired term. Such 
vacancy shall thereupon be filled by a majority vote of the re- 
maining members of the district in which the vacancy occurs. If 
after thirty days following the issuance of the writ of appoint- 

i From the tentative report of the Committee on State Government of 
the National Municipal League. This Committee consists of Charles A. 
Beard, Richard S. Childs, W. F. Dodd, H. W. Dodds, John A. Fairlie, A. R. 
Hatton, A. N. Holcombe, Raymond V- Ingersoll, Isadore Loeb, Clinton 
Rogers Woodruff, Linsay Rodgers, A. E. Sheldon, and A. E. Back. 

207 



208 BUDGET MAKING 

ment the vacancy remains unfilled, the governor shall appoint 
some eligible person for the unexpired term. 

Section 6. A regular session of the Legislature shall be held 
annually (or biennially) beginning on the first Monday in Feb- 
ruary. Special sessions may be called by the governor or by a 
majority vote of the members of the Legislative Council. 

Section 7. The Legislature shall be judge of the election, re- 
turns, and qualifications of its members, but may by law vest 
the trial and determination of contested elections of members 
in the courts. It shall choose its presiding officer and determine 
its rules of procedure, may compel the attendance of absent mem- 
bers, punish its members for disorderly conduct and, with the 
concurrence of two-thirds of all the members, expel a member; 
but no member shall be expelled a second time for the same 
offense. The Legislature shall have power to compel the at- 
tendance and testimony of witnesses and the production of books 
and papers either before the Legislature as a whole or before any 
committee thereof. 

Section 7a. For any speech or debate in the Legislature, the 
members shall not be questioned in any other place. 

Section 7b. The Legislature shall pass no local or special 
act in any case where a general act can be made applicable ; and 
whether a general act can be made applicable shall be a judicial 
question. No local or special act shall take effect until approved 
by a majority of the electors voting thereon in the district to 
be affected, except acts repealing local or special acts in effect 
before the adoption of this constitution and receiving a two 
thirds vote of all members of the Legislature on the question of 
their repeal. 

Section 8. A majority of all the members of the Legislature 
shall constitute a quorum to do business but a smaller number 
may adjourn from day to day and compel the attendance of 
absent members. The Legislature shall keep a journal of its 
proceedings which shall be published from day to day. A vote 
by yeas and nays on any question shall, at the desire of one- 
fifth of those present, be taken and entered on the journal. 

Section 9. A secretary of the Legislature shall be appointed 
in the manner hereinafter provided. The secretary shall ap- 
point and supervise all employees of the Legislature and shall 
have charge of all service incidental to the work of legislation. 
While the Legislature is in session the secretary shall be under 
the control of that body. 

Section 10. No law shall be passed except by bill. All bills 
shall be confined to one subject, which subject shall be clearly 
expressed in the title. Bills for appropriations shall be con- 
fined to appropriations. 



APPENDICES 209 

Section 11. No bill shall become a law until it has been read 
on three different days, has been printed and upon the desks of 
the members in final form at least three legislative days prior 
to final passage, and has received the assent of a majority of all 
the members. Upon final passage the vote shall be by yeas and 
nays entered on the journal ; provided, that the employment of 
mechanical devices to record the votes of members shall not be 
contrary to this provision. 

Section 12. Every bill which shall have passed the Legisla- 
ture shall be presented to the Governor ; if he approve, he shall 
sign it, but if not, he shall return it with his objections to the 
Legislature. Any bill so returned by the Governor shall be re- 
considered by the Legislature and if, upon reconsideration, two- 
thirds of all the members shall agree to pass the bill, it shall 
become a law. In all such cases the vote of the Legislature shall 
be by yeas and nays and entered on the journal. If any bill 
shall not be returned by the Governor within ten days after it 
shall have been presented to him, it shall be a law in like man- 
ner as if he had signed it, but if the Legislature shall by adjourn- 
ment prevent the return of a bill within ten days, any such bill 
shall become a law unless filed by the Governor together with his 
objections in the office of the secretary of the Legislature within 
thirty days after the adjournment of the Legislature. Any bill 
so filed shall be reconsidered by the next session of the Legisla- 
ture as though returned while the Legislature was in session. 

Section 13. Any bill failing of passage by the Legislature 
may be submitted to referendum by order of the Governor if at 
least one-third of all the members shall have been recorded as 
voting in favor of the bill when it was upon final passage. Any 
bill which, having passed the Legislature, is returned thereto 
by the Governor with objections and, upon reconsideration is not 
approved by a two-thirds vote of all the members but is ap- 
proved by at least a majority thereof, may be submitted to refer- 
endum by a majority vote of all the members of the Legislature. 
Bills submitted to referendum by order of the Governor or Legis- 
lature shall be voted on at the next succeeding general election 
unless the Legislature shall provide for their submission at an 
earlier date. 

Section 13a. The Legislature shall, by a majority vote of all 
its members, appoint an auditor who shall serve during the 
pleasure of the Legislature. It shall be the duty of the auditor 
to conduct a continuous audit of all accounts kept by or for 
the various departments and offices of the state government, and 
to report thereon to the Legislative Council quarterly and at 
the end of each fiscal year. He shall also make such additional 
reports to the Legislature and Legislative Council, and conduct 



210 BUDGET MAKING 

such investigation of the financial affairs of the state, or of any 
department or office thereof, as either of such bodies may 
require. 

The Legislative Council 

Section 14. There shall be a Legislative Council consisting 
of the Governor and seven members chosen by and from the 
Legislature. Members of the Legislative Council shall be chosen 
by the Legislature at its first session after the adoption of this 
constitution and at each subsequent session following a general 
election. Members of the Legislative Council chosen by the Leg- 
islature shall be elected by the systems of proportional represen- 
tation with the single transferable vote, and when elected shall 
continue in office until their successors are chosen and have 
qualified. The Legislature, by a majority vote of its members, 
may dissolve the Legislative Council at any time and proceed 
to the election of a successor thereto. 

Section 15. The Legislative Council shall meet as often as 
may be necessary to perform its duties. It shall choose one of 
its members as chairman and shall adopt its own rules of pro- 
cedure, except as such rules may be established by law. The 
Legislative Council shall appoint the secretary of the Legisla- 
ture who shall be ex officio secretary of the Council. 

Section 16. It shall be the duty of the Legislative Council 
to collect information concerning the government and general 
welfare of the state and to report thereon to the Legislature. 
Measures for proposed legislation may be submitted to it at any 
time and shall be considered and reported to the Legislature 
with its recommendations thereon. The Legislative Council may 
also prepare such legislation and make such recommendations 
thereon to the Legislature in the form of bills or otherwise as 
in its opinion the welfare of the state may require. Other 
powers and duties may be assigned to the Legislative Council 
by law. The delegation of authority to supplement existing 
legislation by means of ordinances shall not be deemed a dele- 
gation of legislative power. 

Section 17. Members of the Legislative Council shall receive 
such compensation, additional to their compensation as members 
of the Legislature, as may be provided by law. 

The Executive 

Section 18. The executive power of the state shall be vested 
in a Governor who shall hold his office for a term of four years 
from the first Monday in December next following his election. 



APPENDICES 211 

Any elector of the state shall be eligible to the office of Governor. 

Section 19. In case of death, impeachment, or other disa- 
bility of the Governor, the powers and duties of the office shall 
devolve upon the presiding officer of the Legislature for the re- 
mainder of the term or until the disability be removed. 

Section 20. There shall be such executive departments as 
may be established by law. The heads of all executive depart- 
ments shall be appointed, and may be removed, by the Governor. 
All other officers and employees in the executive service of the 
state shall be appointed by the Governor or by the heads of 
executive departments as may be provided by law. 

Section 21. The Governor and heads of executive depart- 
ments shall be entitled to seats in the Legislature, may introduce 
bills therein and take part in the discussion of measures, but 
shall have no vote. 

Section 21a. The Legislature may, upon due notice given 
and opportunity for defense, remove or retire the Governor 
from office upon the concurrence of two-thirds of all the mem- 
bers elected to the Legislature. 

The Budget 

Section 22. Within one week after the organization of the 
Legislature at each regular session the Governor shall submit to 
the Legislature a budget setting forth a complete plan of pro- 
posed expenditures and anticipated income of all departments, 
offices, and agencies of the state for the next ensuing fiscal year 
(or biennium). For the preparation of the budget the various 
departments, offices, and agencies shall furnish the Governor such 
information in such form as he may require. At the time of 
submitting the budget to the Legislature the Governor shall 
introduce therein a general appropriation bill containing all the 
proposed expenditures set forth in the budget. At the same 
time he shall introduce in the Legislature a bill or bills covering 
all recommendations in the budget for additional revenues or 
borrowings by which the proposed expenditures are to be met. 

No appropriation shall be passed until the general appropria- 
tion bill as introduced by the Governor and amended by the 
Legislature shall have been enacted, unless the Governor shall 
recommend the passage of an emergency appropriation or ap- 
propriations which shall continue in force only until the general 
appropriation bill shall become effective. The Legislature shall 
provide for one or more public hearings on the budget either 
before a committee or before the entire assembly in committee 
of the whole. When requested by not less than one-fifth of the 
members of the Legislature, it shall be the duty of the Governor 



212 BUDGET MAKING 

to appear before the Legislature or to appear in person or by a 
designated representative before a committee thereof to answer 
any inquiries with respect to the budget. 

The Legislature, by appropriate legislation, shall make this 
section effective. 

Section 23. The Legislature shall make no appropriation for 
any fiscal period in excess of the expendable income for that 
period. The Governor may disapprove or reduce items in ap- 
propriation bills and the procedure in such cases shall be the 
same as in the case of the disapproval of an entire bill by the 
Governor. 

Section 24. No money shall be drawn from the treasury ex- 
cept in accordance with appropriations made by law, nor shall 
any obligation for the payment of money be incurred except as 
authorized by law. No appropriation shall confer authority to 
incur an obligation after the termination of the fiscal period 
to which it relates. 



APPENDIX III 

THE BUDGET IN THE MODEL STATE CONSTITUTION 1 

The need for a budget system in controlling the finances of 
state governments is now admitted by practically every one. In 
fact, forty-six states have already provided by statue or by con- 
stitutional amendment for the establishment of such a system. 
There is still, however, considerable difference of opinion upon 
the method by which a budget system should be established. 
The main questions at issue are two— the second being a corol- 
lary of the first. Should the state budget system be established 
by writing some provisions in the constitution? If so, what 
budgetary provisions should be written in the constitution? 

So far, three states (Maryland, Massachusetts, and West Vir- 
ginia) have written budget provisions in their constitutions. 
With most of the other states the budget system has been "on 
trial." Although a number of the states have amended their 
budget laws from time to time, or have passed new budget laws 
repealing the old laws, the experience of these states without 
exception has been such that not one has thought of abandoning 
the budget system. On the contrary, there is a growing opinion 
among the states that it has vindicated its usefulness to such an 
extent that it should be made a permanent procedure for state 
governments. In order to give it this permanency, it should be 
written in the state constitution. When this is done, the system 
will not be susceptible to every political wind that blows; con- 
sequently, it will be much more effective as a method of con- 
ducting the state's business. The National Municipal League's 
committee was unanimously of the opinion that certain gen- 
eral provisions for a budget system should be included in the 
model state constitution. 

When it came to drafting the budget provisions, the members 
of the committee agreed that only the bare essentials of budg- 
etary procedure should be incorporated in the model constitu- 
tion and that all details should be left to a supporting statute. 
As a basis for determining these essentials the committee started 
with the principle that financial planning for the going concern 
of government is initially a function of the executive ; therefore, 

i Eeprint of an article by A. E. Buck in the National Municipal Review 
for July, 1921. 

213 



214 BUDGET MAKING 

the governor should be responsible for the preparation of the 
budget. But it was agreed that the application of this principle 
should not operate to curtail legislative power or control over 
the appropriation of public funds. 

Governor to Direct the Preparation op the Budget 

The budget provisions of the model constitution presuppose 
a compact administration composed of about a dozen depart- 
ments, the heads of which are directly responsible to the gov- 
ernor. 2 Such an organization enables the governor to prepare 
a comprehensive budget plan and, what is even more important, 
it places him in a position where he can really carry out the 
plan when the legislature has authorized the appropriations. 

It is assumed that the new governor will take office about two 
months before the opening of the regular session of the legisla- 
ture. In fact, preceding sections of the model constitution pro- 
vide that the governor will be inaugurated on the first Monday 
in December and that the legislature will meet on the first 
Monday in February. This provision remedies the situation 
existing in a number of states where the outgoing governor 
prepares the budget for the incoming governor and his admin- 
istration. It allows sufficient time for the new governor to get 
the budget in shape for presentation to the legislature at the 
beginning of the session or not later than one week after the 
session begins. There is also an advantage in requiring the 
budget to be submitted to the legislature early in the session; 
it gives plenty of time for committee consideration and review 
by the members themselves. 

It is presumed that the governor will have a permanent 
budget staff agency either in a department of finance or attached 
to his own office, which will work under his direction in the 
preparation of the budget and will be engaged in gathering 
budget information throughout the year. Such a staff seems 
quite essential to successful budget-making, since budget needs 
are determined largely on the basis of past experience. 

For the preparation of the budget the various departments; 
offices, and agencies are required to furnish the governor such 
information in such form as he may require. This provision 
applies to the courts, the legislature, and all agencies of what- 
ever character requesting or receiving financial support from 
the state. It implies that the governor through his staff agency 
is to provide a budget classification and standard forms upon 
which the estimates are to be submitted. The time for sub- 

2 See J. A. Fairlie, "The Executive in the Model Constitution," National 
Municipal Review for April, 1921, pp. 22G-232. 



APPENDICES 215 

mitting the estimates and definite responsibility for their prepa- 
ration may be fixed by statute. 

Form of Budget Document Not Specified 

Nothing is specified as to the form and contents of the budget 
beyond the general statement that the document must set forth 
"a complete plan of proposed expenditures and anticipated 
income' ' for the next ensuing fiscal year. As yet the budget 
movement in this country is not old enough to have developed 
a standard form to be followed in making up a budget docu- 
ment. So far, different states have found it necessary to empha- 
size different features of the financial plan. Where detailed 
provisions on the form of the budget have to be written in the 
constitution, as is the case in Maryland, they have hindered 
rather than helped the making up of a concise and easily under- 
stood document. The development of the technique of properly 
presenting information in the budget document should not be 
hampered by constitutional provisions. Our budget experience 
up to this time indicates pretty clearly one thing : that the com- 
plete budget plan — all proposed expenditures and the means of 
financing them — should be and can be presented in a single-page 
statement, the remainder of the budget document to consist of 
supporting schedules to this statement. If the governor pro- 
poses expenditures in excess of the anticipated expendable 
income of the state, this fact should be clearly shown; and it 
should then be the duty of the governor to recommend addi- 
tional means of meeting the proposed expenditures. Otherwise 
his budget plan will not be complete. 

Governor to Submit Appropriation and Revenue Bills 
to Legislature 

The governor, at the time of submitting the budget to the 
legislature, is required to introduce a general appropriation bill 
containing all the proposed expenditures set forth in the budget 
and likewise a bill or bills covering all recommendations in the 
budget for additional revenues or borrowings by which the pro- 
posed expenditures are to be met. There are three very good 
reasons for this provision. When bills to carry out the budget 
plan are submitted with the budget, the legislature has some- 
thing concrete to refer to its committee and to set to work upon ; 
otherwise the legislature may be inclined to regard the budget 
merely as an administrative report and for that reason give 
little attention to its recommendations. By this procedure the 
governor is given an opportunity to set up in the appropriation 



216 BUDGET MAKING 

act whatever degree of itemization he thinks is necessary and 
to suggest the terms and conditions to be attached to the ap- 
propriations. Furthermore, if the governor proposes to expend 
more money than can be raised under the existing revenue laws, 
he should propose measures by which additional funds are to be 
raised; the legislature should not discuss and pass upon ap- 
propriations without considering, at the same time, the sources 
of income to meet them. 

Governor's Appropriation Bill Given Priority in 
the Legislature 

The legislature is required to pass upon the general appro- 
priation bill and any emergency appropriations recommended 
by the governor before taking up any appropriation bills intro- 
duced by members of the legislature. This provision gives 
precedence to the budget program. It aims at bringing about 
early consideration of the budget plan by the legislature and 
at keeping the attention of the members of that body concen- 
trated on the plan until it is finally acted upon. Emergency 
appropriations cannot be made for a longer period than the date 
when the general appropriation bill becomes effective. 

Legislature not Limited in Its Action on 
Governor's Proposals 

The legislature is not limited in its action upon the general 
appropriation bill. It may amend this bill by increasing, de- 
creasing, or striking out any of the items or by adding new 
items. As a safeguard against ill-advised action on the part of 
the legislature, either in changing the general appropriation 
bill or in passing special appropriation bills, the governor is 
given the power to veto, as a whole or in part, items in such 
bills. As a further check the legislature is not allowed to 
appropriate for any fiscal period in excess of the expendable 
resources of the state for that period. 

Only the Maryland budget amendment and those amendments 
or laws which have been copied from it have placed restrictions 
upon the power of the legislature to increase the governor's 
budget proposals. Of the five states which adopted the Mary- 
land provision, New Mexico and Nevada have eliminated it from 
their budget laws, Utah is dissatisfied with it and likely to 
eliminate it at this session of the legislature, and Indiana's 
proposed budget amendment (copied from Maryland) failed to 
pass the recent legislature a second time largely on account of 
this provision. West Virginia has the provision embodied in a 



APPENDICES 217 

constitutional amendment. The experience of both Maryland 
and West Virginia on this point has not been very satisfactory. 
It would seem that such a provision is practically unnecessary 
in a state government where the administrative organization 
centers responsibility in the governor, as is proposed under the 
model constitution. If the legislature should appropriate more 
money than is necessary to carry on the activities of the gov- 
ernment, the governor can prevent the expenditure of it since 
he is in complete control of the activities. The only need then 
for such a provision is to catch the appropriations that may be 
made for local purposes, the expenditure of which is not admin- 
istered by the governor. In such cases the governor has the 
right to exercise his veto power and consequently prevent the 
appropriation from becoming law unless it is repassed by a 
two-thirds vote of the legislature, in which case the responsi- 
bility is clearly upon the legislature. 

Legislative Procedure on the Budget 

The legislature, which is to be a unicameral body, is required 
to hold at least one open session in its consideration of the 
budget at which taxpayers and the general public may appear 
and be heard on any of the budget proposals. One-fifth of the 
members of the legislature may require the governor to appear 
before the legislative body to explain the budget, or it may re- 
quire the governor or his designated representative to appear 
before any of the legislative committees. This procedure is 
designed to give a minority group in the legislature a chance to 
criticize the budget plan and by this method to interest and 
inform the general public. The governor may voluntarily ap- 
pear before the legislature and discuss the budget. Under other 
provisions of the model constitution he and his department heads 
are given seats in the legislature, but without votes. It is pre- 
sumed that the legislative procedure which is used will be such 
as to give full publicity to the consideration of the budget at all 
stages in its passage through the legislature. It is intended 
that all budget problems will be handled by a single committee. 
This will tend to preserve the unity of the budget plan and will 
avoid the bad practice in a number of states where five or six 
legislative committees work independently on different phases 
'of the budget plan at the same time. 



Indefinite and Continuing Appropriations Eliminated 
Finally, as a check against indefinite and continuing appro- 



218 BUDGET MAKING 

priations, it is provided that no money shall be paid out of the 
state treasury except in accordance with specific appropriations 
made by law, and that an appropriation shall not confer au- 
thority to incur obligations against it after the termination of 
the fiscal period to which it relates. This enables all accounts 
to be closed at the end of the fiscal period and a complete budget 
to be set up for the ensuing fiscal period. Appropriations for 
capital purposes which cannot be materialized within the fiscal 
period should lapse at the end of the period and new appropria- 
tions should be made for continuing the work. Indefinite and 
revenue appropriations should not be made, as neither can be 
properly controlled. All revenues should go into the state 
treasury and expenditures should be made only upon definite 
appropriations by the legislature. Continuing appropriations 
have recently been abolished by law or discontinued in practice 
by several of the states. Wisconsin is the most notable example 
of a state having a system of continuing appropriations. Such 
appropriations really amount to a means of endowing govern- 
mental agencies. Under a centralized and businesslike admin- 
istration, state agencies do not need to be protected in this way 
to insure the prompt discharge of their functions. 



J 



APPENDIX IV 

Standard Budget Section for City Charters x 

Section 1. Annual Budgets. Not later than six weeks be- 
fore the end of the fiscal year, the city manager (or mayor) 
shall prepare and submit to the council an annual budget for 
the ensuing fiscal year. He shall submit the following documents 
to the council : 

1. A budget document, containing the detailed estimates re- 
quired by him from and furnished by the several depart- 
ments and agencies of the city government. 

2. A general appropriation ordinance, containing a summary 
of all proposed expenditures set forth in the budget docu- 
ment. 

3. Revenue measures, if any, covering recommendations in 
the budget for additional revenues by which the proposed 
expenditures are to be met. 

Copies of such budget document shall be printed and be ready 
for distribution not later than two weeks after its submission to 
the council, and a public hearing shall be held thereon before a 
committee of the council prior to action by the council on the 
budget. 

Section 2. Appropriation Ordinance — Transfers. Not later 
than the beginning of the fiscal year the council shall pass an 
annual appropriation ordinance, which shall be based on the 
budget submitted by the city manager (or mayor). The total 
amount of appropriations shall not exceed the total amount of 
the estimated expendable income of the city. No liabilities shall 
be incurred by any officer or employee of the city, except in 
accordance with the provisions of the annual appropriation 
ordinance or under continuing contracts and loans authorized 
Tinder the provisions of this charter. 

At any meeting after the passage of the appropriation ordi- 
nance and after at least one week's public notice, the council, 
by a majority vote, may amend such ordinance so as to au- 
thorize the transfer of unused balances appropriated for one 
purpose to another purpose, to appropriate available revenues 

i From a tentative report of the Governmental Research Conference Com- 
mittee, June, 1921. This Committee consisted of Benjamin Schwartz, 
Chairman, Yonkers, N. Y. ; J. R. Crowell, Toledo, Ohio; D. A. Bandeen, 
El Paso, Texas; D. C. Sowers, Akron, Ohio; and Paul Eliel, San Fran- 
cisco, Cal. 

219 



220 BUDGET MAKING 

not included in the annual budget, or to propose additional 
revenue measures by which the current year's expenditures are 
to be met. The city manager (or mayor) shall, however, have 
the right to transfer appropriations up to $200 within a depart- 
ment or division of the city government without such public 
notice or majority vote of the council. 



Explanatory Note 

The problem of present-day budget making relates not so much to 
the kind of information that should be supplied to the chief executive 
by his department heads, but to the clearing up of the confusion ex- 
isting between the budget document proper and the appropriation 
ordinance. In most cities the lengthy and detailed budget document 
and the appropriation ordinance are one and the same instrument; in 
some, a document is prepared that is a cross between the two. 

There is no place in a charter section for a detailed analysis of the 
information to be required of department heads. The science of budget 
making has advanced far enough to enable an executive to know what 
information is necessary before he can make up a proper budget. The 
budget section of the charter should be brief. The purpose of the sec- 
tion should be to fix responsibility for the making of the budget and 
for the control of expenditures. This can be accomplished by providing 
in the charter for two documents: (1) the budget document, the pur- 
pose of which is to supply detailed information, and (2) the appro- 
priation ordinance, the purpose of which is to summarize the budget 
document for the fixation of responsibility and control. 

Your committee is of the opinion that the appropriation ordinance 
should be passed by the council before the beginning of the fiscal year, 
instead of one month after the beginning of the year, as contained in 
certain charter sections brought to the attention of the committee. The 
budget and program of work should be completed before one dollar is 
spent for the new year. This would obviate the necessity of providing 
for temporary appropriations by the council during the first month 
until the budget is passed. In the matter of the transfer of funds by 
the council from one department to another during the year, your 
committee believes that a majority vote of the council is sufficient and 
safe for this purpose. It further believes in the right of an adminis- 
trative transfer within departments by the chief executive of the city 
without the necessity of public notice or approval by the council, and 
believes that $200 is a safe and reasonable limit to the exercise of this 
right. 

There are other matters related to budget making which do not prop- 
erly belong to this committee's section, but which should be provided 
for in other standard sections of a charter. These matters are : 

1. Uniform fiscal year for cities, beginning with January 1. 

2. Uniform political year for cities, beginning with some date before 
the budget is to be prepared. The incoming administration 
should begin tenure of office before the budget-making period 
starts, in order to gain the experience of making up the financial 



APPENDICES 221 

program of the year, which ordinarily it does not have until a 
year after its inauguration. Furthermore, the provision herein 
recommended would do away with the possibility of an outgoing 
administration, hostile politically to the new administration, 
making up a budget and program of work and policies which 
would be binding on the incoming officers. 



INDEX 



Accounting 33, 185-190 

administrative, 186-188 

independent audit, 188-190 
Acquisition of property, 36, 56, 

118, 123-125 
Administrative accounting, 186- 

188 
Administrative organization 

importance of proper organiza- 
tion, 191 

development of state organiza- 
tion, 191 

condition of state organization, 
193-195 

movement for reorganization, 
195 

plan for decentralization, 195- 
197 

plan for centralization, 197-202 

further changes necessary, 202 
Akron, Ohio 

executive type, 9 

centralized purchasing, 178, 181 
Alabama 

board type, 9 

state budget commission, 9 

revenue laws, 156 

purchasing system, 179, 183 
Allotments, executive, 187 
Appropriation accounts, 145 
Appropriation bill 

distinct from budget, 136 

one versus several, 138 

form, 139 

degree of itemization, 140-142 

classification used in, 142-146 

how to set up, 146-148 

terms and conditions attached, 
148 

supplementary bills, 139 
Appropriation measures, 137-155 
Appropriations 

segregated, 140-142 



Appropriations (Cont.) 

lump-sum, 140-142 

kinds to be avoided, 150 

indefinite, 150 

revenue, 151 

continuing, 151-154 
Arizona 

executive type, 8 

Governor employs budget as- 
sistants, 24 

administrative reorganization 
plan proposed, 199 
Arkansas 

legislative type, 14 

estimates filed with auditor, 102 

study of state organization, 199 
Atlanta, Georgia 

legislative type, 14, 15 

bicameral council, 158 

centralized purchasing, 178, 182 
Auditing, 188-190 



Balance sheet, current, 134 
Baltimore, Maryland 

board type, 13 

Board of Estimates, 13 

bicameral council, 158 

centralized purchasing, 178, 182 
Board type of budget-making au- 
thority, 9-14 
Boards of control, 181, 183 
Boards of estimate (cities), 13 
Bonds, issuance of, 36, 127 

purpose, 36 

term, 36 

nature, 37 

serial bonds, 37 

sinking-fund bonds, 37 
Bonds, payment, of, 118, 125-127 
Borrowing measures, 155 
Borrowing policy, 35-37 
Borrowings, 35-37, 61, 119, 127 



223 



224 



INDEX 



Boston, Massachusetts 

executive type, 9 

budget department, 25-26 

limitations on power of council 
to appropriate, 167 
Budget 

definition, 2 

relation to past and future, 4 

and public opinion, 5 

form and contents, 117-135 

consolidated statement, 117-120 

message, 129-132 

supporting information, 132-135 

financial statements in, 134 

budget bill, 138, 165-168 

legislative consideration of, 157- 
169 

budget speech, 161 

centralized purchasing and, 184 

administrative organization and, 
191-203 
Budget assistants, 22-26 

Colorado budget and efficiency 
commissioner, 24 

New Jersey budget assistants, 
24 

Boston budget commissioner, 25 
Budget bill. See Appropriation 

bill 
Budget bureaus 

United States Bureau of the 
Budget, 22 

Idaho bureau of budget and 
taxation, 23 
Budget information 

character of, 30-37 

classification of, 37-67 

methods of securing, 67-106 

review and revision of, 107-115 
Budget-making authorities 

general character, 6 

classification, 7 

executive type, 7-9 

board type, 9-14 

legislative type, 14 
Budget-making procedure, 2 

what it involves, 3 
Budget message, 129-132 
Budget speech, 161 
Budget staff agencies 

need for, 15 

kinds, 16 



Budget staff agencies (Cont.) 
departments of general admin- 
istration, 17-22 
budget bureaus and assistants, 

22-26 
staffs of budget boards, 26 
budget assistants to legislative 
committees, 27 

Budget system 

essential elements, 1 

city budget systems, 1, 6-15 

national budget system, 1, 9, 

22 
state budget systems, 1, 6-15 

Buffalo, New York % 
board type, 13 

Building program, 104 

Business standards and methods 
employment control, 170-177 
centralized purchasing, 177-185 
uniform accounting, 185-190 



California 

board type, 9 

budget board, 10 

department of finance, 10 

board of control, 10 

State income in special funds, 
121 

civil service, 175 

purchasing system, 179 

administrative reorganization, 
199 
Capital outlays, 36, 55-57 
Centralized-mayor form of city 
government, 7, 9, 22, 198, 
202 
Centralized purchasing 

advantages, 177 

development of, 178-181 

organization of purchasing 
agencies, 181-183 

methods and procedure, 183 

relation to budget, 184 
Character, classification by, 54-57 

appropriations by, 146-148 
Chicago, Illinois 

legislative type, 14 

finance committee of council, 14 

budget staff of city council, 27 

centralized purchasing, 178-182 



INDEX 



225 



Cincinnati, Ohio 

executive type, 9 

centralized purchasing, 178 
City-aided institutions and agen- 
cies, 94-96 
City councils 

unicameral, 158 

small bodies, 158 

consideration of budget, 165 

limitations on appropriating 
power, 167 
City governments, organization of. 
See Administrative organ- 
ization 

commission form, 197, 202 

manager plan, 197, 202 

centralized-mayor form, 198, 202 
City purchasing. See Centralized 

purchasing 
Civil service 

in states, 175 

in cities and counties, 177 
Classification of expenditures 

need for, 38 

by functions, 39-43 

by organization units, 44 

by objects, 44-54 

by character, 54-57 

by funds, 57-59 

composite classification, 59-61 
Classification of positions, 172 
Classification of revenues, 63-67 

need for, 63 

by sources, 63-65 

by funds, 65-67 

by collecting agencies, 67 
Cleveland, F. A., cited The Bud- 
get and Responsible Gov- 
ernment, 199 
Cleveland, Ohio 

executive type, 9 

director of finance, 23 

centralized purchasing, 178, 181 
Collecting agencies, classification 

by, 67 
Colorado 

executive type, 8 

budget and efficiency commis- 
sioner, 24 

revision of estimates, 109 

public hearings, 114 

civil service, 175 



Commission form of city govern- 
ment, 7, 13, 197, 202 
Committee of the whole, 163 
Composite expenditure classifica- 
tion, 59-61 
Connecticut 
board type, 9 
state board of finance, 10 
public hearings, 114 
joint standing committees, 159 
civil service abolished, 175 
administrative reorganization 
plan proposed, 199 
Consolidated budget statement, 

117-135 
Contingencies, 54, 146-148 
Continuing appropriations, 151- 

154 
Cook County 

civil service, 177 
Cost accounts, 33, 186 
Cox, James M. 
budget speech as Governor of 
Ohio, 162 
Current expenses, 36, 56, 118, 121 
Current expenses and fixed 
charges, 35, 55-57, 118, 
120 



Dallas, Texas 

board type, 13 
Dayton, Ohio 

executive type, 9 

department of finance, 23 

object classification of expendi- 
tures, 50 

character classification of ex- 
penditures, 55 

centralized purchasing, 178, 181 
Debt service estimates, 91 
Debt statement, 134 
Deficits, 118 
Delaware 

executive type, 8 

abolished continuing appropria- 
tions, 151 

administrative reorganization 
proposed, 199 
Denver, Colorado 

executive type, 8 
Departmental revenues, 92, 93 



226 



INDEX 



Detroit, Michigan 
executive type, 9 
city comptroller collects esti- 
mates, 25 
expenditure estimate forms, 74 
centralized purchasing, 178, 182 



Emergencies, 118 
Employment management 
questions involved, 171 
relation to administrative organ- 
ization, 171 
classification and standardiza- 
tion, 172 
securing and retaining efficient 

help, 174 
efficiency ratings, 175, 176 
Endowment funds, 59 
Estimate forms, expenditure. See 
Expenditure estimate forms 
Estimates 
forms, 68-96 

sending out of forms^ 98 
preparation of, 97-101 
responsibility for preparation, 

99 
filing of, 101 
investigations of, 102-106 
review and revision of, 107-115 
supporting information, 132- 
134 
Executive type of budget-making 

authority, 7-9 
Expenditure classifications. See 
Classification of expendi- 
tures 
Expenditure data 
from institutions with indus- 
tries, 89, 91 
from boarding halls, 91 
concerning debt requirements, 

91 
from government-aided agen- 
cies, 94-96 
Expenditure estimate forms 
model forms, 73-88 
explanation sheets, 79, 83 
instructions for preparation, 83, 

85, 88 
sending out of, 98 



Federal aid, 101 

Financial statements in budget, 

134 
Financial expenditures. See Means 

of financing 
Fiscal year 

relation to preparation of esti- 
mates, 100 
uniform fiscal year recom- 
mended, 101 
Fitzpatrick, E. A., quoted from 
Budget Making in a De- 
mocracy, 152 
Fixed charges, 55-57, 118, 121-123 
Florida 
board type, 9 
budget commission, 10 
Form and contents of the budget, 

117-135 
Functions, classification by, 39-43 
relation to organization, 43 
appropriations by, 142-146 
Funds, classification by 
expenditures, 57-59 
revenues, 65-67 

supporting statement, 120, 125 
appropriations, 147 



General administration, depart- 
ments and offices of, 17-22 

Illinois department of finance, 
18-20 

Nebraska department of finance, 
20 

Ohio department of finance, 
20 

Massachusetts office of super- 
visor of administration, 21 

Utah department of finance and 
purchase, 21 

Missouri department of budget, 
22 
General fund, 35, 57 

moneys into, 66 

Massachusetts, 121 
General work plan, 88 
Georgia 

board type, 11 

budget and investigating com- 
mittee, 11 



INDEX 



227 



Government-aided institutions and 
agencies, information re- 
quired from, 94-96 
Governmental agencies 
fitness of, to do work, 31 
efficiency of, 32 
organization of, 31-33, 191-203 
cost records, 33, 186 
Governmental needs, relation to 

revenues and taxation, 31 
Grand Rapids, Michigan 

executive type, 9 
Gulick, L. H., reference to Evolu- 
tion of the Budget in 
Massachusetts, 162 



Hartford, Connecticut 
board type, 14 

Hearings, public, 114 

Houston, Texas 
executive type, 9 



Idaho 

executive type, 8 

bureau of budget and taxation, 
23 

functional groups in reorganiza- 
tion, 41, 42 

object classification of expendi- 
tures, 49 

estimate forms, preparation of, 
98 

sending out estimate forms, 
98 

cabinet meetings on estimates, 
110 

public hearings, 114 

purchasing system, 180, 181 

administrative reorganization, 
198, 201 
Illinois 

executive type, 6, 8 

department of finance, 17, 18-20 

functional groups in reorgan- 
ization, 40, 42 

expenditure classification by ob- 
jects, 46 

revenue classification by funds, 
66 

special funds, 66 



Illinois (Cont.) 

revenue classification by collect- 
ing agencies, 67 

expenditure estimate forms, 69, 
70 

standard appropriation ac- 
counts, 70, 187 

institutional plan and chart, 81, 
83 

budget staff agency, 97, 102, 
103 

estimate forms, preparation of, 
98 

sending out estimate forms, 98 

superintendent of budget, 103 

repair needs, investigation of, 
103 

revision of estimates, 109, 110 

cabinet meetings on estimates, 
110 

supporting estimates, 133 

several appropriation bills, 138 

budget speech, 162 

executive control over appro- 
priations, 167 

civil service, 175 

purchasing system, 180, 181 

accounting control, 187 

administrative reorganization, 
198, 199-202 
Indefinite appropriations, 150 
Independent audit, 188-190 
Indiana 

executive type, 8 

state examiner compiles esti- 
mates, 8 
Indianapolis, Indiana 

expenditure estimate forms, 74 
Interest, 121, 127 
Iowa 

executive type, 8 

attempt to reorganize govern- 
ment, 198 



Kansas 

executive type, 8 
revenue estimates, 92 
responsibility for preparation 

of estimates, 99 
public hearings, 114 
civil service, 175 



228 



INDEX 



Kansas City, Missouri 

bicameral council, 158 
Kentucky 

board type, 9 

budget appropriation commis- 
sion, 10 

classification of expenditures by 
objects, 38 

responsibility for preparation 
of estimates, 99 

abolished continuing appropria- 
tions, 151, 152 



Legislative organization, state 
bicameral system, 157-159 
conference committee, 157 
standing committee system, 159 
unicameral system proposed, 
202 

Legislative procedure, state 
submission of budget, 160 
budget speech, 161 
consideration of budget, 162-165 
standing committees, 163 
committee of the whole, 163 
action on appropriation bills, 

165-169 
limitations on appropriating 
power, 165-168 

Legislative reference departments 
and bureaus, 30 

Legislative type of budget-making 
authority, 14 

Los Angeles, California 
legislative type, 14 
centralized purchasing, 178 

Los Angeles County 
civil service, 177 

Louisiana 
board type, 9 
state board of affairs, 10 

Louisville, Kentucky 
bicameral council, 158 

Lowden, Frank O. 

budget speech as Governor of 
Illinois, 162 

Lump-sum appropriations, 140-142 



Maine 
board type, 11 



Maine (Cont.) 

budget committee, 11 

public hearings, 114 

joint standing committees, 159 
Manager form of city governmen * , 

7, 9, 22, 197, 202 
Maryland 

executive type, 8 

no budget staff agency, 25 

classification of budget esti- 
mates, 39 

State-aided institutions and 
agencies, 94 

responsibility for preparation 
of estimates, 99 

revision of estimates, 109 

public hearing's, 114 

consolidated budget statement, 
120 

arrangement of budget, 132 

financial statements in budget, 
134 

form of appropriation bill, 141 

continuing appropriations abol- 
ished, 151 

in-coming Governor prepares 
budget, 160 

legislative procedure on budget, 
162 

limitations on appropriating 
power of legislature, 166 

special appropriation bills, 168 

civil service, 175 

purchasing system, 180-182 

organization of government, 194 

administrative reorganization 
plan proposed, 199 
Massachusetts 

executive type, 8 

office of supervisor of adminis- 
tration, 21 

functional groups in reorganiza- 
tion, 41 

expenditure estimate forms, 74 

estimate forms, preparation of, 
98 

fiscal year and preparation of 
estimates, 100 

estimates filed, 102 

revision of estimates, 109 

consolidated budget statement, 
120 



INDEX 



229 



Massachusetts (Cont.) 

general fund, 121 

budget speech, 162 

legislative procedure, 169 

civil service, 175 

purchasing, 181 

administrative reorganization, 
198 
Mathews, J. M., cited article in 
National Municipal Review, 
199 
Means of financing, 34-37 

current revenues, 35, 56, 61, 119 

borrowings, 35-37, 56, 119, 156 

surplus, 35, 119 

special assessments, 62, 119 
Memphis, Tennessee 

board type, 13 
Message, budget, 129-132 
Michigan 

board type, 9 

State administrative board, 10 

continuing appropriations abol- 
ished, 151 

purchasing system, 180 

administrative reorganization 
proposed, 199 
Milwaukee, Wisconsin 

board type, 14 

board of estimate and taxation, 
14 

centralized purchasing, 178, 182 
Milwaukee County 

civil service, 177 
Minneapolis, Minnesota 

board type, 14 

object classification of expendi- 
tures, 50 

centralized purchasing, 178, 182 
Minnesota f 

executive type; 8 

expenditure classification by ob- 
jects, 38 

revision of estimates, 109 

attempt to reorganize govern- 
ment, 198 
Mississippi 

executive type, 8 

revision of estimates, 109 
Missouri 

executive type, 8 

department of budget, 22 



Missouri (Cont.) 

accounting control, 188 

administrative reorganization 
proposed, 199 
Montana 

board type, 9 

State board of examiners, 10 

arrangement of budget, 132 



National budget plan 

executive type, 9 

bureau of the budget, 22 
National Municipal League 

model state constitution, 202 
Nebraska 

executive type, 8 

department of finance, 17, 20 

functional groups in reorgan- 
ization, 41 

estimate forms, preparation of, 
98 

sending out estimate forms, 98 

revision of estimates, 109 

cabinet meetings on estimates, 
110 

employment control, 176 

purchasing system, 180, 181 

accounting control, 188 

administrative reorganization, 
198, 201 
Nevada 

executive type, 8 

revision of estimates, 109 

public hearings, 114 
Newark, New Jersey 

board type, 13 
New activities, deciding on, 30 
New Hampshire 

executive type, 8 

State treasurer compiles esti- 
mates, 8 

estimates filed with treasurer, 
102 

purchasing system, 179, 182 
New Jersey 

executive type, 8 

comptroller and treasurer assist 
Governor, 8 

budget assistants, 23, 24 

expenditure classification by ob- 
jects, 38, 45 



230 



INDEX 



New Jersey (Cont.) 

expenditure classification by 
functions, 40 

expenditure estimate forms in 
budget law, 68 

number of copies of estimates 
filed, 85 

revenue estimates, 92 

responsibility for preparation 
of estimates, 99 

review of estimates, 112 

public bearings, 114 

joint appropriation committee, 
159 

civil service, 175 

purchasing system, 179, 182 

comptroller appointed by legis- 
lature, 188 

organization of government, 
195 
New Mexico 

executive type, 8 

expenditure estimate forms, 74 

revision of estimates, 109 

public hearings, 114 

administrative reorganization 
proposed, 199 
New Orleans, Louisiana 

board type, 13 
New York 

board type, 11 

board of estimate and control, 
11 

legislative budget committee, 12 

budget clerks, 27 

functional groups, 40 

object classification of expendi- 
tures, 45, 48 

character classification of ex- 
penditures, 55 

expenditure estimate forms, 69, 
71, 74 

number of copies of estimates 
filed, 85 

estimates filed with, 102 

compilation of estimates, 107 

revision of estimates, 109 

joint appropriation committee, 
159 

special appropriation bills, 168 

civil service, 175 

purchasing system, 180 



New York (Cont.) 

accounting control, 186 

attempts to reorganize govern- 
ment, 198, 199 
New York City 

board type, 13 

board of estimate and appor- 
tionment, 13 

budget staff, 26-27 

appropriations to functions, 142 

centralized purchasing, 178, 182 
North Carolina 

board type, 11 

budget commission, 12 

continuing appropriations abol- 
ished, 151 
North Dakota 

board type, 11 

State budget board, 12 

estimates filed with auditor,, 102 

public hearings, 114 

continuing appropriations abol- 
ished, 151 



Oakey, F., reference to Principles 
of Government Accounting 
and Reporting, 134 
Objects 

classification of expenditures by, 
44-54 

model classification, 51-54 

supporting schedule by, 123-125 

appropriations classified by, 
142-148 
Ohio 

executive type, 8 

department of finance, 20 

expenditure classification by 
functions, 40 

expenditure classification by ob- 
jects, 47 

revenue classification by sources, 
63 

expenditure estimate forms, 70 

classification code, 79 

estimate forms, preparation of, 
98 

cabinet meetings on estimates, 
110 

standing committees, 159 

budget speech, 162 



INDEX 



231 



Ohio (Cont.) 

civil service, 175 

purchasing system, 179, 181 

accounting control, 188 

administrative reorganization 
199, 200, 201 
Oklahoma 

executive type, 8 

Governor employs budget as- 
sistants, 24 

revision of estimates, 109 

public hearings, 114 
Operation account, 134 
Oregon 

board type, 9 

budget commission, 10 

attempt to reorganize govern- 
ment, 198 

administrative reorganization 
proposed, 199 
Organization of state and city 
governments. See Admin- 
istrative organization 
Organization units 

definition, 44 

primary budget classification, 
44 

expenditures shown by, 121-123 

appropriations according to, 
139, 146-148 



Pennsylvania 

no budget law, 14 
State-aided institutions and 
agencies, 84 
Personal control. See Employ- 
ment management 
Philadelphia, Pennsylvania 
executive type, 9 
unicameral council, 158 
centralized purchasing, 178, 
182 
Pork-barrel measures, 168 
Portland, Oregon 
board type, 13 
Preparation of estimates, responsi- 
bility for, 99 
Property. See Acquisition of 

property 
Providence, Rhode Island 
legislative type, 14, 15 



Public hearings, 114 
Purchasing. See Centralized pur- 
chasing 



Redemption of debt, 56, 91, 118, 

125, 127, 129, 148 
Repairs 

determination of needs, 103 
Revenue 

defined, 61-63 

classifications. See Classifica- 
tion of revenues 

in budget, 119, 125 
Revenue appropriations, 151 
Revenue estimates 

departmental and institutional, 
92 

suggested form, 93 

sending out of, 98 
Revenue measures, 155 
Review and revision of estimates 

why necessary, 107 

duty of budget-making author- 
ity, 108 

legal provisions for, 109 

conferences of administrative 
officers, 110-113 

tentative budget proposals, 112- 
114 

-.public hearings, 114 

final revision, 115 
Revolving or rotary funds, 53 
Rhode Island 

no budget law, 14 
Rochester, New York 

board type, 14 
Rotary or revolving funds, 53 



St. Louis, Missouri 

board type, 13 

board of estimate and appor- 
tionment, 13 

centralized purchasing, 178 
St. Paul, Minnesota 

object classification of expendi- 
tures, 50 
San Francisco 

legislative type, 14 
School boards, city 

in budget, 120 



232 



INDEX 



Seattle, Washington 
legislative type, 14, 15 
finance committee, 14, 15 
Segregated appropriations, 140- 

142 
Segregated budget. See Segre- 
gated appropriations 
Serial bonds, 37, 118, 125 
Sinking funds, 37, 58, 91, 127 
Sinking-fund bonds, 37, 58, 91, 

118, 127 
Sinking-fund installments, 37, 56, 

91, 118, 127 
Sources, classification of revenues 
by, 63-65 
model classification, 64 
South Carolina 
executive type, 8 
chairmen legislative committees 

assist governor, 8 
Governor employs budget as- 
sistants, 24 
functional classification of ex- 
penditures, 42 
object classification of expendi- 
tures, 47 
character classification of ex- 
penditures, 55 
revision of estimates, 109 
public hearings, 114 
South Dakota 
board type, 11 
State budget board, 12 
public hearings, 114 
Special appropriation bills 
pork-barrel measures, 168 
handling of, 168 
Special assessments 
defined, 62 
in budget, 119 
Special funds, 58 

revenues into, 61, 6Q 
Staffs of budget boards and com- 
mittees, 26 
Wisconsin staff, 26 
New York State budget clerks, 

27 
New York City budget staff, 26 
Chicago city council staff, 27 
Standard appropriation accounts 
of Illinois, 46, 70, 187 



Standard specifications 
for personnel, 33, 172 
for commodities, 33, 183 
Standardization of salaries, 172 
Standing committee procedure, 

163 
State-aided institutions and agen- 
cies, 94-96 
State budget laws, citations of, 

205 
State governments, organization 
of. See Administrative or- 
ganization 
development of, 191 
present condition of, 193-195 
reorganization movement, 195- 

202 
further changes necessary, 202 
State legislatures 
organization, 157-160, 202 
procedure on budget, 160-169 
State purchasing. See Centralized 

purchasing 
Supplementary appropriation bills, 

139 
Surveys 
general activities, 102-104 
financial and economic, 105 
Suspense funds, 59 
Syracuse, New York 
board type, 14 



Tax deficiencies, 118 
Temporary loans, 118 
Tennessee 

board type, 9 

State budget commission, 10 

revision of estimates, 109 

public hearings, 114 

revenue laws, 156 

comptroller appointed by legis- 
lature, 188 

administrative reorganization 
plan proposed, 199 
Tentative budget proposals, 112- 

114 
Texas 

board type, 9 

state board of control, 12 

purchasing system, 179, 183 



INDEX 



233 



Texas (Cont.) 
study of administrative organ- 
ization, 199 
'Toledo, Ohio 
executive type, 9 
director of finance, 23 
centralized purchasing, 178, 
181 
Trust funds, 62 



Unit costs, 33 

United States Bureau of the Bud- 
get, 22 
Director of the Budget, 22 
United States Bureau of the 
Census 
classification of expenditures, 
41 
Utah 

executive type, 8 
department of finance and pur- 
chase, 21 
revision of estimates, 109 
public hearings, 114 
limitations on legislative power, 

166 
purchasing system, 180 
accounting control, 188 



Vermont 

board type, 11 

committee on budget, 12 

classification of expenditures by 
objects, 38 

revision of estimates, 109 

public hearings, 114 

continuing appropriations abol- 
ished, 151 

purchasing system, 179, 182 
Veto, executive, 166, 168 
Virginia 

executive type, 8 

advisory board, 8 

Governor employs budget as- 
sistants, 25 

expenditure classifications, 38 

expenditure classification by 
functions, 40, 42 

object classification of expendi- 
tures, 47 



Virginia (Cont.) 

character classification of ex- 
penditures, 55 

income in general fund, 58 

revenue classification by collect- 
ing agencies, 67 

expenditure estimate forms, 69 

number of copies of estimates 
filed, 85 

special investigations of esti- 
mates, 104 

general survey, 104 

financial and economic survey, 
105 

revision of estimates, 109, 112 

public hearings, 114 • 

budget message, 131 

financial statements in budget, 
134 

tentative appropriation bill, 137 

appropriations to functions, 
142-145 

joint standing committee, 159 

legislative procedure on budget, 
162 

purchasing, 181 

auditor appointed by legisla- 
ture, 188 

organization of government, 193 
Votes on account, 101 



Washington 
board type, 9 

State finance committee, 11 
cabinet meetings on estimates, 

110 
purchasing system, 181 
administrative reorganization, 

199, 201 
West Virginia 
board type, 9 
board of public works, 11 
responsibility for preparation 

of estimates, 99 
revision of estimates, 109 
public hearings, 114 
arrangement of budget, 132 
limitations on appropriating 

power of legislature, 166 
Wisconsin 
board type, 6, 11 



234 



INDEX 



Wisconsin (Cont.) 

State board of public affairs, 12 
budget staff, 26, 98, 103 
review of estimates, 111 
continuing appropriations, 151 
civil service, 175 
purchasing, 181 

organization of government, 
195-197 

Work plan, general, 88 

Working capital funds, 53, 59 

Wyoming 

executive type, 8 
Governor employs budget as- 
sistants, 25 



Wyoming (Cont.) 

road construction plan and 

chart, 82 
financial and economic survey, 

106 
revision of estimates, 109 
public hearings, 114 
employment control, 176 
purchasing system, 180 



Young, Benjamin Loring 
budget speech before 

chusetts legislature, 1919, 
162 



(D 



' 



iviic 9.51949 






V XV ^ * / ^ 



V 



0, "/> 







v v . xv -> * » / ^ 












* iAsa /)i r v^ -£ * x(\ ke A r ' '^ -£ * i-!\\ «» A, <-> ^Z* <» * 



9^ ^,,s^ ^ 'o 







^ 




* .,** 



# 



^ ^ X 
•0 V XV ^ 



P* ^ ^ « 






V XV 





F *-l*<?„ >3> f CF xv-- ' 

*- „ £L ^ *^ *r v ' r n ^^ n o 



0° , 



fe\rf '; \\.$ 



O, ' 6 ... s s \v 
l b V xv ^"/. -^ 



V" ^ 



^ <3* 



0/ ^ 





















%^ : 






^ ^ '+W!s.rV ^ V 










^ ^"', <i*''"*^ r^ +-"*.<&/■"*<$ *■"''. <&.'"* cP 





Vfc, 0° ." v 









^ ^ 








- "W :M-Af 



r ^ ^ 



i vr*°'-%- o vr* '«v #Vr^% o°\ 

,4 



V „ v * 








r^" ^;-,--.^'" ^^;'^"^^^ 




ffiARY i( 0F CONGRESS 



021 183 111 A 



